In creating an index, the traditional approach has been to weight a component according to market capitalization. But more recently, companies have applied the term “smart beta” to an index that is created using alternate approaches.

Among the “smart” (or, in some cases, “strategic”) beta products are equally weighted indexes, fundamentally weighted indexes (which focus on a particular financial aspect of a security, such as its dividends or earnings), factor-weighted indexes (such as value or momentum) and volatility-weighted indexes.

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