For instance, the JPMorgan Diversified Return Global Equity ETF (NYSEArca: JPGE) and recently launched JPMorgan Diversified Return International Equity ETF (NYSEArca: JPIN) both track a smart-beta index, which diversify risks that are less likely to be rewarded while overweighting areas that are more likely to be rewarded. [J.P. Morgan Goes Global With Second ETF]

The ETFs “create a strategic allocation to developed market international equities that improves upon traditional cap-weighted indices by maximizing risk-adjusted return,” Devlin said.

Specifically, the underlying index utilizes a top-down approach in risk allocation to equally distribute the portfolio’s risk across 40 regional sectors, along with its bottom-up four-factor ranking process, which screens and ranks developed country stocks by value, size, momentum and low volatility factors.

The ETFs “can provide lower risk access to international equities than cap-weighted and add further diversification benefits because of the unique methodology,” Emmett added.

Both JPGE and JPIN track FTSE’s Diversfied Factor indices, but JPIN excludes North American markets, including the U.S. and Canada. Dr. David Kelly, Chief Global Strategist and Head of Global Market Insights Strategy Team, also mentions that international markets are showing relatively cheaper earnings and valuations, compared to the U.S. An investors who is seeking to diversify a U.S.-heavy equity portfolio could look for cheaper opportunities overseas.

Financial advisors who are interested in learning more about strategic-beta or smart-beta ETFs can listen to the webcast here on demand.

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