More than 10 years ago, we launched a series of earnings- and dividend-focused core beta ETFs to finally give open-minded investors a chance to break the shackles placed on them by the S&P 500, an index that we think was invented with little thinking and that became “the benchmark” almost solely because it was the first one to exist.
With a wealth of smart beta indices to choose from, market participants may find it difficult to decide when each factor-based strategy is best suited to deliver returns. Is it wise to rely solely on the performance of one factor? If not, what multi-factor approaches could be considered and how effective are they?
This paper will discuss what WisdomTree believes is one key factor to building smart beta indexes for U.S. equities: profitability. Incorporating profitability into the selection and weighting of its components is one element that sets WisdomTree apart in its earnings family of Indexes.
Investors are increasingly making decisions based on short-term market trends due to the role of incentives, the media, financial reporting, and other decision-making biases. But there are opportunities for differentiated performance when investors hold securities for longer periods.
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