The goal is to build
upon smart beta factor research to help identify dividend growth stocks for further analysis.
We see investors incorporating
smart beta factors into portfolios in two distinct ways, depending on the investment outcome to be achieved and how hands - on the investor wants to be in managing their allocations:
Using Factors to Select Dividend Growth Stocks The reason that this article is a «bonus edition» in the Dividend Growth Stock of the Month series is that I am going to
use smart beta factors to select many of the stocks to cover in 2016.
The ETF employs what WisdomTree calls an alpha - driven smart beta strategy, meaning the fund will directly target
multiple smart beta factors.
In this month's Investment Outlook we discuss: an introduction to smart beta and its uses, the PNC Smart Beta Allocation, and
smart beta factors and backtesting.
Whether you bring together multiple factors to seek deliberate and diversified outcomes or single factor ETFs to implement more precise views —
smart beta factors can be useful tools to gain transparent and low cost access to the intuitive and long - standing investment ideas that drive performance.
In a nutshell, smart beta funds select and weight stocks to emphasize
the smart beta factors.
Luciano Siracusano, chief investment strategist at WisdomTree explains, «WisdomTree's existing suite of dividend - and earnings - weighted ETFs have typically tapped into
the smart beta factors of value, quality and size and, in many instances, have outperformed their market capitalization - weighted benchmarks, while exhibiting relatively low tracking error against those benchmarks.
It's no secret that not
all smart beta factors work all the time.
Smart beta fee's do tend to be higher then market cap passive index funds, but in practice it's really no harder for a computer to maintain
a smart beta factor then it is a market cap weighting, so what justifies the fees?
Instead of just capturing different asset classes,
a Smart Beta factor investor will gain value by focusing on including stocks that can generate returns in excess of the market.
I'm with Meb Faber in the belief that
the Smart Beta factors are timeless, however I could be wrong.