Finding a system that beats the market consistently may feel like a bit of magic, however the quest continues! Rather you can aim for return optimization at a lower level of risk and cost, which is exactly what Smart Beta Funds are meant to achieve.
Active Vs Passive Investing: In India, actively managed funds have consistently outperformed the broader market as well as passively managed funds, by a significant margin owing to their smart stock picking strategy. These funds typically invest into stocks based on a host of qualitative and quantitative factors like stock valuations, sectoral theme, market capitalization, earnings potential, volatility, dividend potential, to name a few.
The strategy may differ across funds, but what is common is active management of a fund, comes at a higher cost. However, practical experience globally has shown that consistent alpha generation over time has proved to be hard, due to which investors doubt the possibility of constantly generating incremental returns.
