What we ingest financially can be at times over-filling. Bear with me, this will be worth your while.
Have you heard the term “smart-beta”? Know what plain-old “beta” is?
Beta is a term used in investing and statistics. For investing purposes, it refers to the volatility of the broad market as a whole. For example, the S&P 500, a basket of America’s largest 500 companies that is compiled and tracked by Standard & Poor’s, is generally considered to be a proxy of the broad US stock market. It has a beta of 1.
An individual stock with a beta of 1.5 would be considered 50% more volatile than the broad market. Conversely, an individual stock with a beta of .5 would be considered to be 50% less volatile than the broad market.
With me so far?
Smart-beta is an attempt to gain a little more return, called alpha, out of the broad market.
Some back story, let’s take a little trip and re-visit high school science… Read More