Decoding smart beta investing strategy and factors affecting it

This methodology allows investors to construct portfolios that align with their specific goals and risk tolerance.

One of the key advantages driving the popularity of Smart Beta funds is their cost-effectiveness, offering investors low-cost, curated solutions for portfolio allocation.

This has sparked interest among a diverse range of investors, from seasoned professionals to newcomers looking for efficient and strategic investment avenues.

DP Singh, Deputy MD & Chief Business Officer at SBI MF, expressed optimism about the strategy's potential during an interview with CNBC-TV18.

He noted, "These kinds of strategies generally outperform. We feel that there is a niche that prefers the active, and there is a particular niche that wants to do it passively. So, this factor investing is preset rule-based investing not linked to the market cap and a particular index but based on whatever we feel will do better in times to come."

Ruchit Mehta, Head of Research at SBI MF, shed light on the traditional factors influencing rule-based investing.

He stated, "Traditionally there have been four factors in rule-based investing – growth, value, quality, and momentum, and in each factor, you are looking at a sub-set of parameters to try and rank individual stocks."