‘Smart Beta’: Bridging Active Vs. Passive and managing risk via volatility

Institutional investors have used alternative weighting and factor-driven strategies since the 1970s, though no one called them “smart beta” back then. Now that the term has become mainstream, nonmarket-cap-weighted ETFs have gained steam.

“Smart beta” approaches are currently the fastest-growing segment of the ETF marketplace, pulling in assets at twice the rate of the entire ETF market.

“The default setting for an ETF, a non-strategic beta ETF, is to be tied to an index whose components are weighted by market capitalization … A strategic (or “smart”) beta ETF, on the other hand, has its components weighted by some other criteria.”

Advantages & Disadvantages Of Smart Beta

To use smart beta effectively, you need to:

  1. Be able to identify which factor(s) can produce alpha
  2. Be able to identify when that factor will come in and/or out of favour via a market environment change

You may also need to overcome some disadvantages of smart beta; namely, the following:

  1. Ask yourself, does the expected alpha overcome higher expense ratios?
  2. More concentrated portfolios can increase return but they can also increase stock-specific risk.
  3. Wider spreads on trading these less liquid products require one to ask whether the expected alpha outweighs the risks.

Managing risk to the upside and downside via low-volatility and higher-volatility ETFs seems to be the most valid use of smart beta

http://europe.etf.com/blog/10378-smart-beta-bridging-active-vs-passive.html?showall=&fullart=1&start=2

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One Of Bitcoin’s Strongest Backers Reveals The Two Big Reasons Why It’s Still Not Mainstream

One Of Bitcoin’s Strongest Backers Reveals The Two Big Reasons Why It’s Still Not Mainstream

Most Bitcoin users are simply sitting on their holdings, and that this results in price volatility

http://feedproxy.google.com/~r/businessinsider/~3/Xh3-xy10j50/fred-wilson-on-bitcoin-2014-7

albertobalatti_boardmember_bitcoin_volatility