Vanguard Begins Updating Its Investing Philosophy - Bloomberg
...First, factor-based investing involves assembling portfolios based on specific quantifiable characteristics such as valuation, capitalization size, earnings quality, momentum and so on....
...., smart beta is a way to assemble an index by means other than the traditional weighting by market capitalization, again with the goal of outperforming the market As we have previously discussed, it has attracted lots of capital, even as some have dismissed it as a mere marketing gimmick.
Vanguard has been offering funds that are variants of smart beta and/or factor for a while. For example, the Vanguard Dividend Appreciation exchange-traded fund, with about $27 billion in assets, is made up of large capitalization companies selected based upon their history of increasing dividends; the $35 billion Vanguard Value ETF is based on a classic value factor screen. Both are passively managed and tied to an index, and both have been around for more than a decade. The firm has other similar funds as well.
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