Smart beta edge


Portfolio rebalancing in our opinion is one of those investing maxims that sounds good in theory but is difficult to pull off in practice.

Rebalancing is all about regularly realigning the weightings of a portfolio’s asset allocations in a disciplined way to stay on track with strategic investment goals. 

It’s a rules-based approach that reallocates portfolio weight away from securities that have recently outperformed to those that have underperformed.

 

smart beta

 

 

 

Portfolio Drift

Investors who don’t rebalance may find themselves overexposed to rich asset classes and underexposed to cheap ones. That can be risky.

Trouble is, individual investors sometimes have a hard time selling past winners or taking short-term losses. Emotions keep getting in the way.

What’s more, traditional passive investment products that have become popular in recent years typically don’t have a rebalancing feature.

 

Smart beta

If you see the value in regular portfolio rebalancing, smart beta strategies may be an option.

Smart beta strategies are one of the most popular and powerful trends in investing.

Smart beta ETFs are carefully constructed indexes that rank stocks by traits other than their market value, the standard methodology employed by traditional benchmarks, such as the Standard & Poor’s 500.

 

Factor Investing

Instead, these products focus on “factors,” such as growth, value, dividends, volatility or other financial metrics that offer the possibility of market-beating performance and reduced portfolio risk.

Covestor has introduced a new lineup of smart beta portfolios designed for exposure to desirable stock characteristics such as robust growth, valuation, quality, and dividends.

The Covestor Smart Beta product has filters to screen out undesirable stocks and a repeatable rules-based framework to determine position allocations.

 

Auto Rebalancing

Portfolios are rebalanced quarterly; stocks sold are replaced by new ones with more attractive characteristics

And with an 8 basis point management fee, Covestor Smart Beta portfolios are competitive with existing products in the marketplace.

Interested in finding out more? You can learn more about Covestor, or try our services with a free trial account. Or check out this informative video.

Photo Credit: Tom Gores via Flickr Creative Commons


Disclaimer: Covestor’s Smart Beta Portfolios are not Exchange-Traded Funds or mutual funds but are portfolios made up of individual stock holdings. These portfolios mainly invest in stocks and may not be suitable for all investors. You may lose all or part of investments in these portfolios, and their past performance is no guarantee of future results. You may find additional information on the risks, conflicts of interest, applicable brokerage commissions, fractional shares, and limitations on investments and divestments associated with these portfolios (along with Covestor’s full disclosures) on the Forms and Agreements page at ibkram.com. Covestor Ltd. is an investment advisor registered with the Securities and Exchange Commission (“SEC”). Registration does not imply a certain level of skill or training. Brokerage services are provided to Covestor clients by Interactive Brokers LLC, an SEC-registered broker-dealer and member NYSE/FINRA/SIPC and a Covestor affiliate.

Author profile

IB Asset Management
IB Asset Management
IB Asset Management is a pioneer in online investing. IB Asset Management offers a variety of portfolios, including the Smart Beta portfolios, which are managed by IB Asset Management's Chief Investment Officer and Investment Management team. The “Smart Beta” approach to portfolio construction is grounded in academic research. The goal is to achieve an alternative risk-return profile which is more attractive than a simple capitalization-weighted index such as the S&P 500. IB Asset Management Smart Beta portfolios are designed to provide systematic exposure to a fundamental factor or combination of factors. Portfolios are constructed using a rules-based approach and offered at a relatively low cost.