William D. Smith, CFP®, AIF®, AEP®, RICP®, LUTCF, CLTC, Advanced Planning Advisor

CONNECT

Address:

8816 Six Forks Road
Suite 301
Raleigh, NC 27615

Phone:

919.719.3839

Is Smart Beta Smart for You?

Traditional investment indexes such as the S&P 500 are weighted based on market capitalization, the value of a company's total outstanding stock. This means the largest companies in the index may have much greater influence than smaller companies on index performance — and on funds that track the index. For example, the 10 largest companies in the S&P 500 account for about 20% of the index's performance, as opposed to about 2% for any 10 companies if every company were weighted equally.1

Funds that track market-weighted indexes may be the most direct way to participate in broad market performance, but there has been increasing interest in an alternative indexing strategy called smart beta, also known as strategic beta or factor-based investing.

Shifting the Weight

Smart-beta funds track indexes