Dividend Index Funds And Smart Beta Strategy

Investors all around the world are finding new ways and devising new strategies to build a portfolio which outperforms the market.There are different types of investors in the market with different preferences who aim to achieve a different objective than the others. Thus, financial services are coming up with different investment plans and funds which can reflect the different investment segments. One such investment plan is Dividend Investing where the investors invest in Dividend Index Funds. These are for investors who are basically looking at their income growth and dividend index funds help these investors to invest in stock in portfolio of stocks which usually higher dividends than expected. In financial terms, they invest in companies with a higher dividend yield.

An investor’s goal is to make returns higher than the market’s. They are constantly looking for ways in which they can build a portfolio which is competent enough to beat the market. In their chase to earn higher returns, many fund managers have formulated a strategy known as the Smart Beta strategy which uses different index construction methods rather than the traditional equity index to build a portfolio. The funds are not managed actively but they take care of the volatility in the market so that it doesn’t affect the fund performance.

Such strategy has been proven to be less costly than most actively managed funds and like most other strategy aims at diversification to maximize returns with the least cost. There is no one way to form a Smart Beta strategy. This makes it more flexible. The fund managers in order to gain higher yields can spread the investment amount to various different avenues.

Truly, the financial world has grown tremendously. Each market is interlinked with another in such an intricate way, that whatever investment approach you choose, it will get affected by the world and domestic market movement. As an investor, you need to understand the risks and rewards before narrowing down to one strategy. Understand your own needs first and then the market. Lastly, invest smartly!

Source : http://thematicinvesti.livejournal.com/3030.html