Smart Beta ETF vs Customized Factor Portfolios

Reducing the risk of conflicting factor exposures

Nicolas Rabener
10 min read
5 May 2025

SUMMARY

  • Smart beta ETFs have multiple factor exposures
  • Combining these in a portfolio leads to factor offsetting
  • Customized stock-based portfolios can reduce such risks

INTRODUCTION

When envisioning the ideal stock portfolio, one might seek stocks that are undervalued yet outperforming, with low volatility. Ideally, these companies would also exhibit strong earnings growth, profitability, and minimal leverage. However, such stocks rarely exist.

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