Smart Beta is an investment strategy that combines passive indexing with active factors to improve returns or reduce risk compared to traditional market-cap weighted indices.
Smart Beta strategies track indices, but instead of weighting stocks purely by market capitalization, they use specific factors such as value, momentum, quality, or low volatility.
This approach aims to outperform traditional indices or provide better risk-adjusted returns. Smart Beta funds are available as ETFs or index mutual funds and are regulated in India by the Securities and Exchange Board of India.
"A Smart Beta fund tracks an index of top low-volatility stocks instead of all market-cap weighted stocks."