The Oppenheimer Russell 1000 Low Volatility Factor ETF (OVOL) follows the theme where stocks that exhibit lower volatility tend to perform better than stocks with higher volatility.
Lastly, the Oppenheimer Russell 1000 Yield Factor ETF (OYLD) tracks the idea that higher-yielding stocks tend to perform better than stocks with lower yields.
“Many of these are well-known principles or fundamentals that investors can understand. And then lastly, there’s this multifactor category, and these are where single factor strategies are combined together. So, just two or more single factors can create a multifactor type outcome,” Levitt said.
For example, the Oppenheimer Russell 1000 Dynamic Multifactor ETF (Cboe: OMFL) and Oppenheimer Russell 2000 Dynamic Multifactor ETF (Cboe: OMFS) select companies through exposure to a subset of the low volatility, momentum, quality, size and value factors.
These types of factor-based investments help investors steer away from the potential risks associated with a traditional market-cap weighted fund that can grow top heavy, especially in a prolonged bullish environment.
“When you weight based on price, you just keep increasing your weighting as the price goes up. If you weight based on something fundamental, you participate through the quarter, and then take it back to its fundamental weight in the portfolio,” Levitt said.
“We can systematically be contrarian, focus on fundamentals above focusing just on price,” Mazza added.
Financial advisors who are interested in learning more about Smart Beta strategies can watch the webcast here on demand.