Focusing on Quality to Deliver a Smarter Smart Beta ETF

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By Crystal McClenthen

It’s not a new concept: try to bet on the winner, hopefully come home with the cash. When talking about investing, Warren Buffett has said it best: “It’s better to buy a wonderful company at a fair price than a fair company at a wonderful price.” The challenge, of course, is twofold. First you must, somehow, find a way to identify “wonderful” companies. Second, you must be able to wisely incorporate those companies into your overall portfolio in a way that not only helps ensure diversification, but also aims to protect your assets in an environment of high market volatility and rising interest rates. But how?

One possible solution is to carefully pick what you believe will be the winners (more on that in a minute!) and build them into a Smart Beta ETF that seeks to provide the ability to gain access to a single risk factor at a lower cost point. And while there are as many strategies out there as there are ETFs, here’s why a strategy designed to pick the winners may be the right route to help your clients achieve the outcomes they’re seeking today—even in this wild ride of a market.