3 smart beta ETFs for investors looking to beat the market

These smart beta ETFs target shares with characteristics shown to beat the market in the long term.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Investing in ETFs is a quick and relatively inexpensive way for new investors to get exposure to the stock market. But for those who aren’t so keen to track broad market indexes, smart-beta ETFs may offer many of the benefits of active management but at substantially lower costs.

Unlike most traditional ETFs, which are typically passive funds that follow popular stock market indexes such as the FTSE 100 and the S&P 500, smart-beta ETFs follow a different kind of index, in which stock weights are not purely dependent on market capitalisation. Instead, stock weights depend on other factors, such as volatility, momentum, value or dividend history. And as such, smart beta ETFs target shares with characteristics shown to beat the market in the long term.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Minimum volatility

In the low volatility space, there’s the iShares Edge MSCI World Minimum Volatility UCITS ETF (LSE: MVOL). The fund aims to provide investors diversified exposure to developed companies, while seeking to minimise the market’s ups and downs.

It tracks the performance of a selected portfolio of shares, which on aggregate, has lower volatility characteristics relative to broader equity indexes. It’s clear that the intention is to create a less risky portfolio of shares, but there are also downsides to consider.

Firstly, its performance over the past three years has been less stellar than the standard MSCI World Index, with a total return of 31%, compared to the benchmark’s gain of 53%. Additionally, fees may be somewhat more expensive than the cheapest ETFs on the market today, as the iShares’ smart beta fund has a total expense ratio (TER) of 0.3%.


For income investors, the SPDR S&P Euro Dividend Aristocrats UCITS ETF (LSE: EUDV) may be a better pick. The fund invests in the 40 highest yielding eurozone companies within the S&P Europe Broad Market Index that have either increased or maintained annual dividends for at least 10 consecutive years.

Shares in the ETF are sterling-denominated, making it simpler and potentially cheaper for most UK investors. But despite being sterling-denominated, investors are still exposed to currency risks — as the fund’s stock holdings are euro-denominated, your returns may fall or rise as the pound strengthens or weakens against the euro.

As of 31 July, France is its largest geographical exposure, representing nearly 30% of total assets, and this is followed by Germany (22.8%), Italy (12.5%) and the Netherlands (11.2%). The weighted-average dividend yield for its portfolio is 3.65% and the fund’s TER is 0.35%.


Finally, the Vanguard Global Value Factor UCITS ETF (LSE: VVAL) is one of my favourites among value-focused funds. It uses a rules-based active approach that favours stocks which trade at low multiples on book value, past earnings, estimated future earnings and operating cash flow. It’s a relatively new fund, launched only in December 2015, but has so far performed well.

Since its inception less than two years ago, the ETF has delivered a total return of 52%, which significantly exceeds its benchmark FTSE Developed All Cap Index’s performance of 36% over the same period. Looking ahead however, future outperformance can’t be assured. Past performance may not be a good indicator for future results, and there are concerns that performance chasers are pushing prices to unsustainable levels.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Senior woman wearing glasses using laptop at home
Investing Articles

SSE shares are up 15% since the market correction! Should I buy?

Jabran Khan looks at why SSE shares have been on an upward trajectory in recent weeks and decides if he…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

After crashing 29%, Spectris shares look cheap to me

After peaking at 4,167p last September, Spectris shares have slumped by over 29%. But I see deep value in the…

Read more »

British Pennies on a Pound Note
Investing Articles

Here is why I added this dirt-cheap FTSE 100 penny stock to my holdings!

Jabran Khan explains why he added this dirt-cheap FTSE 100 stock to his holdings and is excited by its recovery…

Read more »

Woman looking at a jar of pennies
Investing Articles

3 FTSE 100 penny stocks! Which is the cheapest buy?

Our writer examines three penny stocks that feature in the FTSE 100 index to ascertain whether they have a place…

Read more »

Arrowings ascending on a chalkboard
Investing Articles

Is the Vodafone share price an opportunity at current levels?

Jabran Khan looks at the current Vodafone share price and decides if he would add the shares to his holdings…

Read more »

Smiling senior white man talking through telephone while using laptop at desk.
Investing Articles

4 gems I’d include in my Stocks & Shares ISA

Jon Smith explains some of the top stocks he's thinking about including in his Stocks and Shares ISA a we…

Read more »

Compass pointing towards 'best price'
Investing Articles

At 85p, are Rolls-Royce shares a no-brainer buy? 

The Rolls-Royce share price look very cheap right now. And I think this might be my last chance to buy…

Read more »

positive mental health woman
Investing Articles

My £3-a-day blue-chip passive income plan

Our writer sets out his passive income plan of investing a few pounds each day in top stocks.

Read more »