What to Look for in 'Smart-Beta' ETFs | Page 2 of 2 | ETF Trends

“They basically look for companies that Buffett would consider a high-quality,” Lee said.

Lee’s other pick, the iShares MSCI USA Momentum Factor ETF, follows a disciplined approach to exploit momentum. However, MTUM is more expensive than the others because of its turn over rate.

“It seems like a dumb strategy; that is you’re chasing returns up and you’re kicking out losers, things that have gotten much cheaper,” Lee added. “But historically this has been a very powerful strategy that has worked in virtually every market that’s been examined.”

Depending on an investor’s comfort level, strategy ETFs can be used as alternatives for core holdings. Lee likens switching out core holdings for strategy ETFs as something similar to using actively managed funds as a core holding. However, for those less comfortable with strategy ETFs, these offerings may also be used in a smaller tactical tilt.

“If you are comfortable owning actively managed mutual funds in your portfolio as your core holdings, as many investors do, then there’s nothing that would prevent you from owning these factor or strategy ETFs as your core holdings,” Lee said.

For more information on ETFs, visit our ETF 101 category.

Max Chen contributed to this article.