Smart Way to Strategic Beta Investment
Thematic investing - Investors around the globe are devising new methods to outperform the market with different types of investments and funds. The aim is to achieve a higher return than that of the market’s. For that, they have to make an investment portfolio that beats the market. Enter Smart Beta. It provides a clean solution to the investing problem. It refers to investment products and a growing group of indexes that aim to maximize the returns and minimize the risk.
New strategies and tactics are floating over the market for years. Each new strategic investment works on maximizing the total return indices. Thematic investing is one such strategy built for the purpose. It helps to manage funds and related stocks and thus helps to gain the exposure to macroeconomic trends and themes in the market.
HOW CAN THEMATIC INVESTING HELP?
Thematic investing boasts on making portfolio’s returns higher. So what really can help thematic investing do this? Let us take a look:
- Low Correlation: low correlation to the returns of the traditional method of growth and a negative correlation with relative returns on such value strategies diversifies the investor’s portfolio. Diversification leads to maximum returns with low risk factor.
- Hedge against Rapid Change: this strategy has the power to complement the traditional strategy of index by creating a hedge. As such approaches focus on changes that are secular and innovative.
- Alpha at Scale: the alpha is a measuring unit of the fund performance against benchmark index. Benchmark captures previously achieved successes, while thematic investments emphasizes on capturing future growth which would help the investors earn higher market premium.
The financial world is growing rapidly and every market is related to another in such manner that a smart approach to investment affects domestic markets as well as global markets. There are certain risk and rewards to each investment strategy. As an investor, it is upon your understanding to market needs where you want to narrow it all down. Smart investments will get you higher yields but, understanding individual needs and then the market needs, would help you decide smartly which smart strategy to follow!
Source : https://equityindex.quora.com/Smart-Way-to-Strategic-Beta-Investment