It looks like you're new here. If you want to get involved, click one of these buttons!
The Financial Industry Regulatory Authority (FINRA) issued a new Investor Alert called Smart Beta—What You Need to Know. FINRA is publishing this alert to educate investors about financial products, primarily ETFs, which are linked to and seek to track the performance of alternatively weighted indices commonly referred to as "smart beta" indices.
Some widely known indices, including as the S&P 500, NASDAQ 100 and Russell 2000, use a company's market capitalization to determine how much weight that particular stock will have in the index – others, like the Dow Jones Industrial Average, use price weighting. A smart beta index takes an alternative approach: weighting the index with a non-market-capitalization-based measure such as earnings or volatility or more.
"While products tracking smart beta indices can offer potential advantages, including diversification through exposure to non-market-cap-weighted indices, these products can also carry investment risks," said Gerri Walsh, FINRA's Senior Vice President for Investor Education. "Returns for smart beta products may be very different from investments that track market-cap-weighted indices."
Smart Beta—What You Need to Know provides investors with an overview of smart beta strategies, which can range from products that track relatively straightforward equal-weighted indices to products linked to fundamentally weighted indices, in which the index components are determined based on companies' revenues, dividends or other corporate metrics.
© 2015 Mutual Fund Observer. All rights reserved.
© 2015 Mutual Fund Observer. All rights reserved. Powered by Vanilla