{"id":78084,"date":"2026-10-28T17:34:20","date_gmt":"2026-10-28T12:04:20","guid":{"rendered":"https:\/\/www.5paisa.com\/finschool\/?post_type=markets&#038;p=78084"},"modified":"2026-10-28T17:42:38","modified_gmt":"2026-10-28T12:12:38","slug":"smart-beta-funds","status":"publish","type":"markets","link":"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/smart-beta-funds\/","title":{"rendered":"Smart Beta Funds"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"78084\" class=\"elementor elementor-78084\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-top-section elementor-element elementor-element-4be72f6 elementor-section-full_width tab_container elementor-section-height-default elementor-section-height-default\" data-id=\"4be72f6\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-default\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-100 elementor-top-column elementor-element elementor-element-d209c0c\" data-id=\"d209c0c\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<section class=\"elementor-section elementor-inner-section elementor-element elementor-element-896d102 elementor-section-full_width elementor-section-height-default elementor-section-height-default\" data-id=\"896d102\" data-element_type=\"section\">\n\t\t\t\t\t\t<div class=\"elementor-container elementor-column-gap-wide\">\n\t\t\t\t\t<div class=\"elementor-column elementor-col-50 elementor-inner-column elementor-element elementor-element-c9133f2 chapters_list\" data-id=\"c9133f2\" data-element_type=\"column\">\n\t\t\t<div class=\"elementor-widget-wrap elementor-element-populated\">\n\t\t\t\t\t\t<div class=\"elementor-element elementor-element-aa101bd elementor-widget elementor-widget-shortcode\" data-id=\"aa101bd\" data-element_type=\"widget\" data-widget_type=\"shortcode.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<div class=\"elementor-shortcode\">\t<script>\n\t\tjQuery(document).ready(function(){\n\t\t\tjQuery(\"#post_chapters a[href*='\" + location.pathname + \"']\")\n\t\t\t\t.addClass(\"current\")\n\t\t\t\t.attr(\"aria-current\", \"page\");\n\t\t})\n\t<\/script>\n\t<div class=\"desktop_chapters\"><div id=\"post_chapters\"><div class=\"post_chapters-heading\">Chapters<\/div><ul><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/background-and-orientation\/\">Background and Orientation<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-math\/\">Personal Finance Math<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/money-today-vs-money-tommorrow\/\">Money Today vs Money Tommorrow<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/the-retirement-part-1\/\">The Retirement -Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/assumptions-in-retirement-planning\/\">Assumptions in Retirement Planning<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/understanding-stock-funds\/\">The Role of Mutual Funds in Modern Finance<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/concept-of-fund-and-nav\/\">Concept of Fund and NAV<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/understanding-the-performance-of-your-fund\/\">Mutual Fund Factsheet<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/the-equity-scheme\/\"> The Equity Scheme<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/equity-scheme-part-2\/\">Equity Scheme Part 2<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/debt-funds-part-1\/\">Debt Funds Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/monitoring-your-portfolio\/\">Debt Funds Part 2<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/debt-funds-part-3\/\">Debt Funds Part 3<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/debt-funds-part-4\/\">Debt Funds Part 4<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/investing-in-bonds\/\">Investing in Bonds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/index-funds\/\">Index Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/arbitrage-funds\/\">Arbitrage Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/measuring-mutual-fund-returns\/\">Measuring Mutual Fund Returns<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/rolling-returns\/\">Rolling Returns<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-expense-ratio\/\">Mutual Fund Expense Ratio<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-benchmarking\/\">Mutual Fund Benchmarking<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-beta-sd-and-sharpe-ratio\/\">Mutual Fund Beta SD and Sharpe Ratio<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/sortino-and-capture-ratios\/\">Sortino and Capture Ratios<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/how-to-analyse-equity-mutual-funds\/\">How to Analyse Equity Mutual Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/how-to-analyse-debt-mutual-fund\/\">How to Analyse Debt Mutual Fund<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/mutual-fund-portfolio\/\">Mutual Fund Portfolio<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/smart-beta-funds\/\">Smart Beta Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/asset-allocation\/\">Asset Allocation<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/exchange-traded-funds\/\">Exchange Traded Funds<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/basics-of-macro-economics\/\">Basics of Macro Economics<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-part-1\/\">Personal Finance-Part 1<\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/personal-finance-review-part-2\/\">Personal Finance Review Part 2 <\/a><\/li><li><i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i>&nbsp;&nbsp;&nbsp;<a href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/know-your-funds\/\">Know Your Funds<\/a><\/li><\/ul><\/div><\/div><div class=\"chapters_toggle\"><a href=\"#\" id=\"open_chapters\" aria-label=\"View chapters\"><span>View Chapters<\/span>&nbsp;&nbsp;&nbsp;<i class=\"fa fa-chevron-right\" aria-hidden=\"true\"><\/i><\/a><a href=\"#\" id=\"close_chapters\" style=\"display:none;\" 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    <span class=\"eael-tab-title title-after-icon\" >Slides<\/span>                            \n                                                    <\/li>\n                                            <li id=\"videos\" class=\" eael-tab-item-trigger eael-tab-nav-item\" aria-selected=\"false\" data-tab=\"3\" role=\"tab\" tabindex=\"-1\" aria-controls=\"videos-tab\" aria-expanded=\"false\">\n                            \n                                                                <i class=\"far fa-eye\"><\/i>                                                            \n                                                            <span class=\"eael-tab-title title-after-icon\" >Videos<\/span>                            \n                                                    <\/li>\n                    \n                                  <\/ul>\n            <\/div>\n            \n            <div class=\"eael-tabs-content\">\n\t\t        \n                    <div id=\"study-tab\" class=\"clearfix eael-tab-content-item active-default\" data-title-link=\"study-tab\">\n\t\t\t\t        <p><div class='white' style='background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;'>\n<div id='text_slider' class='owl-carousel sa_owl_theme owl-pagination-true' data-slider-id='text_slider' style='visibility: visible;visibility:visible;'>\n<div id='text_slider_slide01' class='sa_hover_container' data-hash='Setting-the-Stage' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>27.1 Setting the Stage<\/b><\/strong><\/h2>\r\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"aligncenter wp-image-78013 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Scene.png\" alt=\"Setting the Scene\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Scene.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Scene-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Scene-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Scene-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Scene-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Scene-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Scene-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Scene-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>This chapter introduces a relatively new category of funds in India \u2014 <strong><b>smart-beta funds and ETFs<\/b><\/strong>. Unlike traditional index funds that simply track a market-cap weighted benchmark (like Nifty 50), smart-beta funds use alternative methods of weighting stocks.<\/p>\r\n<p>For example, instead of giving more weight to companies with the largest market capitalization, a smart-beta index might assign weights based on <strong><b>earnings, dividends, or profitability<\/b><\/strong>. The idea is to capture certain characteristics of stocks that historically drive returns.<\/p>\r\n<p>Think of it like cooking: a traditional recipe follows exact proportions (market-cap weighting), while smart-beta tries different combinations of ingredients (factors) to enhance flavor.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide02' class='sa_hover_container' data-hash='What-Are-Factors?' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>27.2 \u2013 What Are Factors?<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-78014 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-are-Factors.png\" alt=\"What are Factors\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-are-Factors.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-are-Factors-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-are-Factors-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-are-Factors-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-are-Factors-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-are-Factors-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-are-Factors-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/What-are-Factors-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>A <strong><b>factor<\/b><\/strong>\u00a0is a persistent driver of stock returns. Factor investing means building portfolios around these traits. Academic research, starting with the <strong><b>Capital Asset Pricing Model (CAPM)<\/b><\/strong>, evolved into the <strong><b>Fama-French models<\/b><\/strong>, which identified multiple factors beyond just market risk.<\/p>\r\n<p>Here are the most common factors explained simply:<\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Factor<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Meaning<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Example<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Value<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Cheap stocks have historically outperformed expensive ones<\/p>\r\n<\/td>\r\n<td>\r\n<p>A stock trading at low pricetobook but strong fundamentals<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Momentum<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Recent winners tend to keep winning (and losers keep losing) in the short to medium term<\/p>\r\n<\/td>\r\n<td>\r\n<p>A stock rising steadily for 12 months often continues upward<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Low Volatility<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Lowerrisk stocks deliver better riskadjusted returns<\/p>\r\n<\/td>\r\n<td>\r\n<p>Consumer staples outperform during downturns<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Quality<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Profitable, stable companies outperform weaker ones<\/p>\r\n<\/td>\r\n<td>\r\n<p>Firms with strong balance sheets and steady cash flows<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Size<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Smaller companies outperform larger ones<\/p>\r\n<\/td>\r\n<td>\r\n<p>Mid-caps often grow faster than mega-caps<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>In India, data is limited, but early studies show <strong><b>momentum and low volatility<\/b><\/strong>\u00a0strategies have delivered attractive returns, though momentum comes with sharper drawdowns.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide03' class='sa_hover_container' data-hash='Smart-Beta-Funds-in-India' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>27.3 \u2013 Smart Beta Funds in India<\/b><\/strong><\/h2>\r\n<p><img decoding=\"async\" class=\"aligncenter wp-image-78015 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Smart-Beta-Funds-In-India.png\" alt=\"Smart Beta Funds In India\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Smart-Beta-Funds-In-India.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Smart-Beta-Funds-In-India-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Smart-Beta-Funds-In-India-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Smart-Beta-Funds-In-India-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Smart-Beta-Funds-In-India-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Smart-Beta-Funds-In-India-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Smart-Beta-Funds-In-India-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Smart-Beta-Funds-In-India-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Smart beta ETFs and index funds are relatively new in India; most launched after 2018, though the category has grown rapidly since 2020. Examples include <strong><b>quality ETFs, value ETFs, and low volatility ETFs<\/b><\/strong>.<\/p>\r\n<p>However, live performance often differs from back-tested\u00a0index data due to <strong><b>costs, liquidity, and market efficiency<\/b><\/strong>. In the US, factor ETFs have longer histories, and the evidence shows factors are <strong><b>cyclical<\/b><\/strong>\u00a0\u2014 they can outperform for years, then underperform for a decade or more.<\/p>\r\n<p>For instance:<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Value stocks <\/b><\/strong>underperformed growth stocks for well over a decade in the US (roughly 2007\u20132020).<\/li>\r\n<li><b><\/b><strong><b>Momentum ETFs <\/b><\/strong>delivered strong gains but suffered steep declines during market reversals.<\/li>\r\n<\/ul>\r\n<p>This cyclical nature means investors must be patient and avoid chasing recent winners blindly.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide04' class='sa_hover_container' data-hash=' Do-Smart-Beta-Funds-Work?' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>27.4 \u2013 Do Smart Beta Funds Work?<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78016 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Do-Smart-Beta-Funds-Work.png\" alt=\"Do Smart Beta Funds Work\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Do-Smart-Beta-Funds-Work.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Do-Smart-Beta-Funds-Work-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Do-Smart-Beta-Funds-Work-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Do-Smart-Beta-Funds-Work-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Do-Smart-Beta-Funds-Work-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Do-Smart-Beta-Funds-Work-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Do-Smart-Beta-Funds-Work-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Do-Smart-Beta-Funds-Work-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>There are two schools of thought:<\/p>\r\n<ol>\r\n<li><b><\/b><strong><b>Sceptics:<\/b><\/strong>Believe factors are just backtested data mining. They argue that once markets become efficient, these premiums disappear.<\/li>\r\n<li><b><\/b><strong><b>Believers:<\/b><\/strong>Point to firms like <strong><b>Dimensional Fund Advisors (DFA)<\/b><\/strong>, managing hundreds of billions of dollars using factor strategies, as proof that factors can work long-term.<\/li>\r\n<\/ol>\r\n<p>The truth lies in between. Factors <strong><b>do work<\/b><\/strong>, but their premiums are not constant. They ebb and flow, requiring long horizons and tolerance for underperformance.<\/p>\r\n<p>Challenges today:<\/p>\r\n<ul>\r\n<li>Markets are more efficient with data widely available.<\/li>\r\n<li>Too many \u201cnew factors\u201d discovered through data mining \u2014 the so called <strong><b>factor zoo<\/b><\/strong>.<\/li>\r\n<li>Premiums shrink as more money chases the same strategies.<\/li>\r\n<\/ul>\r\n<p>So, while factors remain useful, investors must temper expectations and understand the pain involved in harvesting them.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide05' class='sa_hover_container' data-hash='Should-You-Invest-in-Smart-Beta-Funds?' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>27.5 \u2013 Should You Invest in Smart Beta Funds?<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78017 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest.png\" alt=\"Should You Invest\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Should-You-Invest-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Smart-beta funds should not replace index funds or consistently managed active funds. Instead, they can complement your portfolio.<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Core allocation: <\/b><\/strong>Index funds or diversified active funds.<\/li>\r\n<li><b><\/b><strong><b>Satellite allocation: <\/b><\/strong>Smart-beta funds for potential extra returns.<\/li>\r\n<\/ul>\r\n<p>But remember:<\/p>\r\n<ul>\r\n<li>Factors can underperform for long stretches.<\/li>\r\n<li>Each factor ETF defines its methodology differently (e.g., value could mean price to book, price to sales, or forward earnings).<\/li>\r\n<li>Diversification across factors is key. Multi factor products (like ICICI Prudential Alpha Low Vol 30 ETF, which tracks the Nifty Alpha Low\u2011Volatility 30 index, or the actively managed, rules\u2011based DSP Quant Fund) combine traits; read the index or fund methodology carefully, as approaches differ.<\/li>\r\n<\/ul>\r\n<p><strong><b>Table: Comparing Fund Types<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Fund Type<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Weighting Method<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Pros<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Cons<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Index Fund<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Marketcap weighted<\/p>\r\n<\/td>\r\n<td>\r\n<p>Simple, low cost, broad exposure<\/p>\r\n<\/td>\r\n<td>\r\n<p>Heavy reliance on large caps<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Active Fund<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Fund manager discretion<\/p>\r\n<\/td>\r\n<td>\r\n<p>Potential to beat benchmark<\/p>\r\n<\/td>\r\n<td>\r\n<p>High fees, inconsistent performance<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Smart Beta Fund<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Factor based weighting<\/p>\r\n<\/td>\r\n<td>\r\n<p>Targets specific drivers of returns<\/p>\r\n<\/td>\r\n<td>\r\n<p>Cyclical, methodology differences<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>\u00a0<\/b><\/strong><\/p>\r\n<p><strong><b>Key Takeaways<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b>Smart beta is essentially factor investing with alternative weighting.<\/li>\r\n<li>Factors like value, momentum, low volatility, quality, and size drive returns but are cyclical.<\/li>\r\n<li>Indian smart beta ETFs are new; US data shows long cycles of underperformance.<\/li>\r\n<li>Use smart beta funds as a supplement, not a core holding.<\/li>\r\n<li>Diversify across factors and avoid chasing past performance.<\/li>\r\n<\/ul>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<\/div>\n<\/div>\n<script type='text\/javascript'>\n\tjQuery(document).ready(function() {\n\t\tjQuery('#text_slider').owlCarousel({\n\t\t\titems : 1,\n\t\t\tsmartSpeed : 400,\n\t\t\tautoplay : false,\n\t\t\tautoplayHoverPause : false,\n\t\t\tsmartSpeed : 400,\n\t\t\tfluidSpeed : 400,\n\t\t\tautoplaySpeed : 400,\n\t\t\tnavSpeed : 400,\n\t\t\tdotsSpeed : 400,\n\t\t\tdotsEach : 1,\n\t\t\tloop : false,\n\t\t\tnav : true,\n\t\t\tnavText : ['Previous','Next'],\n\t\t\tdots : true,\n\t\t\tresponsiveRefreshRate : 200,\n\t\t\tslideBy : 1,\n\t\t\tmergeFit : true,\n\t\t\tautoHeight : true,\n\t\t\tmouseDrag : false,\n\t\t\ttouchDrag : true\n\t\t});\n\t\tjQuery('#text_slider').css('visibility', 'visible');\n\t\tvar owl_goto = jQuery('#text_slider');\n\t\tjQuery('.text_slider_goto1').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 0);\n\t\t});\n\t\tjQuery('.text_slider_goto2').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 1);\n\t\t});\n\t\tjQuery('.text_slider_goto3').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 2);\n\t\t});\n\t\tjQuery('.text_slider_goto4').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 3);\n\t\t});\n\t\tjQuery('.text_slider_goto5').click(function(event){\n\t\t\towl_goto.trigger('to.owl.carousel', 4);\n\t\t});\n\t\tvar resize_77918 = jQuery('.owl-carousel');\n\t\tresize_77918.on('initialized.owl.carousel', function(e) {\n\t\t\tif (typeof(Event) === 'function') {\n\t\t\t\twindow.dispatchEvent(new Event('resize'));\n\t\t\t} else {\n\t\t\t\tvar evt = window.document.createEvent('UIEvents');\n\t\t\t\tevt.initUIEvent('resize', true, false, window, 0);\n\t\t\t\twindow.dispatchEvent(evt);\n\t\t\t}\n\t\t});\n\t});\n<\/script>\n<\/p><p>\u00a0<\/p>                    <\/div>\n\t\t        \n                    <div id=\"slides-tab\" class=\"clearfix eael-tab-content-item \" data-title-link=\"slides-tab\">\n\t\t\t\t        <p><div class='white' style='background:rgb(255, 255, 255); border:solid 0px rgb(255, 255, 255); border-radius:0px; padding:0px 0px 0px 1px;'>\n<div id='text_slider' class='owl-carousel sa_owl_theme owl-pagination-true' data-slider-id='text_slider' style='visibility: visible;visibility:visible;'>\n<div id='text_slider_slide01' class='sa_hover_container' data-hash='Setting-the-Ground-Rules' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>26.1 \u2013 Setting the Ground Rules<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78008 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Ground-Rules.png\" alt=\"Setting the Ground Rules\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Ground-Rules.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Ground-Rules-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Ground-Rules-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Ground-Rules-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Ground-Rules-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Ground-Rules-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Ground-Rules-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Setting-the-Ground-Rules-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Before building any mutual fund portfolio, two foundations must be in place: <strong><b>risk cover<\/b><\/strong>\u00a0and <strong><b>emergency cover<\/b><\/strong>. Without these, investing is like constructing a house without a foundation.<\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Risk cover: <\/b><\/strong>Life is unpredictable. Illness, accidents, or untimely death can derail financial plans. That\u2019s why term insurance\u00a0(for dependents) and health insurance (for medical costs) are non-negotiable. For example, a 30 year old earning \u20b912 lakh annually should ideally have a term cover of about \u20b91.2\u20131.8 crore (roughly 10\u201315 times annual income) to ensure family stability.<\/li>\r\n<li><b><\/b><strong><b>Emergency cover: <\/b><\/strong>Insurance doesn\u2019t solve every crisis. You need liquid cash for sudden expenses \u2014 job loss, urgent repairs, or upfront hospital deposits. Instead of following the \u201c6month expenses\u201d rule blindly, tailor it to your family\u2019s lifestyle. A household spending \u20b950,000 monthly may need \u20b93\u20134 lakh, but a family with school fees and EMIs may require \u20b98\u201310 lakh.<\/li>\r\n<\/ul>\r\n<p>Think of insurance and emergency funds as the seatbelt and airbags\u00a0before you drive into the investment highway.<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide02' class='sa_hover_container' data-hash='Defining-Financial-Goals' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>26.2 \u2013 Defining Financial Goals<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78009 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Defining-Financial-Goals.png\" alt=\"Defining Financial Goals\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Defining-Financial-Goals.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Defining-Financial-Goals-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Defining-Financial-Goals-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Defining-Financial-Goals-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Defining-Financial-Goals-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Defining-Financial-Goals-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Defining-Financial-Goals-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Defining-Financial-Goals-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Every portfolio begins with a <strong><b>goal<\/b><\/strong>. A financial goal must specify:<\/p>\r\n<ol>\r\n<li>The <strong><b>amount<\/b><\/strong><\/li>\r\n<li>The <strong><b>time horizon<\/b><\/strong>.<\/li>\r\n<li>The <strong><b>current age\/life stage <\/b><\/strong>of the investor.<\/li>\r\n<\/ol>\r\n<p>Examples:<\/p>\r\n<ul>\r\n<li>A 28 year old couple wants \u20b91.2 crore in 12 years for a home.<\/li>\r\n<li>A 42 year old professional wants \u20b920 lakh in 6 years for a child\u2019s education.<\/li>\r\n<li>A 23 year old wants \u20b915 lakh in 7 years for a master\u2019s degree abroad.<\/li>\r\n<\/ul>\r\n<p>Without these specifics, goals remain vague. Saying \u201cI want enough money for studies\u201d is incomplete. Goals must be <strong><b>quantified and time bound<\/b><\/strong>.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide03' class='sa_hover_container' data-hash='Mutual-Fund-Cheat-Sheet' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>26.3 \u2013 Mutual Fund Cheat Sheet<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78010 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Mutual-Fund-Cheat-Sheet.png\" alt=\"Mutual Fund Cheat Sheet\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Mutual-Fund-Cheat-Sheet.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Mutual-Fund-Cheat-Sheet-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Mutual-Fund-Cheat-Sheet-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Mutual-Fund-Cheat-Sheet-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Mutual-Fund-Cheat-Sheet-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Mutual-Fund-Cheat-Sheet-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Mutual-Fund-Cheat-Sheet-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Mutual-Fund-Cheat-Sheet-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>To simplify fund selection, here\u2019s a <strong><b>cheat sheet<\/b><\/strong>\u00a0of categories, attributes, and suitability:<\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Fund Type<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Category<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Main Constituents<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Expected CAGR<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Min Holding Period<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Best For Goal<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Special Remark<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Large-cap<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Equity<\/p>\r\n<\/td>\r\n<td>\r\n<p>Top 100 companies<\/p>\r\n<\/td>\r\n<td>\r\n<p>9\u201311%<\/p>\r\n<\/td>\r\n<td>\r\n<p>7+ years<\/p>\r\n<\/td>\r\n<td>\r\n<p>Long-term wealth, retirement<\/p>\r\n<\/td>\r\n<td>\r\n<p>Stable but slower growth<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Mid-cap<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Equity<\/p>\r\n<\/td>\r\n<td>\r\n<p>Mid-sized firms<\/p>\r\n<\/td>\r\n<td>\r\n<p>11\u201313%<\/p>\r\n<\/td>\r\n<td>\r\n<p>7+ years<\/p>\r\n<\/td>\r\n<td>\r\n<p>Growth goals (house, education)<\/p>\r\n<\/td>\r\n<td>\r\n<p>Higher volatility<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Small-cap<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Equity<\/p>\r\n<\/td>\r\n<td>\r\n<p>Emerging firms<\/p>\r\n<\/td>\r\n<td>\r\n<p>13\u201315%<\/p>\r\n<\/td>\r\n<td>\r\n<p>10+ years<\/p>\r\n<\/td>\r\n<td>\r\n<p>Aggressive wealth creation<\/p>\r\n<\/td>\r\n<td>\r\n<p>Very volatile<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Index fund<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Equity<\/p>\r\n<\/td>\r\n<td>\r\n<p>Market index<\/p>\r\n<\/td>\r\n<td>\r\n<p>9\u201311%<\/p>\r\n<\/td>\r\n<td>\r\n<p>10+ years<\/p>\r\n<\/td>\r\n<td>\r\n<p>Retirement corpus<\/p>\r\n<\/td>\r\n<td>\r\n<p>Low cost, passive<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Short-term debt<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Debt<\/p>\r\n<\/td>\r\n<td>\r\n<p>Bonds (1\u20133 yrs)<\/p>\r\n<\/td>\r\n<td>\r\n<p>6\u20137%<\/p>\r\n<\/td>\r\n<td>\r\n<p>2\u20133 years<\/p>\r\n<\/td>\r\n<td>\r\n<p>Medium-term goals<\/p>\r\n<\/td>\r\n<td>\r\n<p>Safer, but credit risk<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Liquid fund<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Debt<\/p>\r\n<\/td>\r\n<td>\r\n<p>Money\u2011market papers (up to 91 days)<\/p>\r\n<\/td>\r\n<td>\r\n<p>5.5\u20136.5%<\/p>\r\n<\/td>\r\n<td>\r\n<p>0\u20131 year<\/p>\r\n<\/td>\r\n<td>\r\n<p>Emergency corpus<\/p>\r\n<\/td>\r\n<td>\r\n<p>High liquidity<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>Hybrid fund<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>Mix<\/p>\r\n<\/td>\r\n<td>\r\n<p>Equity + Debt<\/p>\r\n<\/td>\r\n<td>\r\n<p>7\u20139%<\/p>\r\n<\/td>\r\n<td>\r\n<p>5+ years<\/p>\r\n<\/td>\r\n<td>\r\n<p>Balanced goals<\/p>\r\n<\/td>\r\n<td>\r\n<p>Moderate risk<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>Avoid overlap:<\/b><\/strong> Many investors hold 3\u20134 large-cap funds across AMCs. But their top holdings (HDFC Bank, Infosys, Reliance) overlap heavily. Instead, diversify across <strong><b>categories<\/b><\/strong> (large-cap + mid-cap + debt) and <strong><b>AMCs<\/b><\/strong>.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide04' class='sa_hover_container' data-hash='Portfolio-by-Elimination' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>26.4 \u2013 Portfolio by Elimination<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78011 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Portfolio-by-Elimination.png\" alt=\"Portfolio by Elimination\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Portfolio-by-Elimination.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Portfolio-by-Elimination-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Portfolio-by-Elimination-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Portfolio-by-Elimination-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Portfolio-by-Elimination-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Portfolio-by-Elimination-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Portfolio-by-Elimination-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Portfolio-by-Elimination-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>The <strong><b>elimination method<\/b><\/strong>\u00a0helps narrow down fund choices by removing unsuitable categories for each goal.<\/p>\r\n<p><strong><b>Case 1 \u2013 Couple Saving for a Home (\u20b91.5 Cr in 10 years)<\/b><\/strong><\/p>\r\n<ul>\r\n<li>Monthly savings: \u20b960,000 combined.<\/li>\r\n<li>Suitable funds: Largecap + Midcap.<\/li>\r\n<li>Eliminated: Smallcap (too volatile), Thematic (sector risk), Debt (not needed during the accumulation phase).<\/li>\r\n<\/ul>\r\n<p><strong><b>Projection (10% CAGR):<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Year<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Corpus (\u20b9 lakh)<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>5<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>46<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>8<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>87<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>10<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>121<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>They reach ~\u20b91.21 Cr. A small home loan bridges the gap. <strong><b>Risk control:<\/b><\/strong>\u00a0Shift gradually to debt funds from year 8 onwards to protect corpus from market downturns.<\/p>\r\n<p><strong><b>Case 2 \u2013 Parent Saving for Child\u2019s Education (\u20b925L in 8 years)<\/b><\/strong><\/p>\r\n<ul>\r\n<li>Monthly savings: \u20b920,000.<\/li>\r\n<li>Suitable funds: Shortterm debt + Arbitrage + 20% equity (largecap).<\/li>\r\n<li>Eliminated: Smallcap, Gilt (long duration, rate\u2011sensitive), Credit risk (too risky).<\/li>\r\n<\/ul>\r\n<p><strong><b>Projection (7% CAGR):<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Year<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Corpus (\u20b9 lakh)<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>4<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>11<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>6<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>18<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>8<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>25<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>Goal achievable with balanced allocation.<\/p>\r\n<p><strong><b>Case 3 \u2013 Lump Sum Retirement Corpus (\u20b950L, 20+ years horizon)<\/b><\/strong><\/p>\r\n<ul>\r\n<li>Strategy: Park in liquid fund, stagger into equity over 6\u201312 months.<\/li>\r\n<li>Target funds: Index + Midcap.<\/li>\r\n<li>Example: Redeem about \u20b98.3L monthly from the liquid fund over 6 months \u2192 invest in chosen equity funds.<\/li>\r\n<\/ul>\r\n<p><strong><b>Projection (10% CAGR, 20 years):<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td width=\"4\">\u00a0<\/td>\r\n<td>\r\n<p><strong><b>Year<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Corpus (\u20b9 Cr)<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td width=\"4\">\u00a0<\/td>\r\n<td>\r\n<p><strong><b>10<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>1.3<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td width=\"4\">\u00a0<\/td>\r\n<td>\r\n<p><strong><b>15<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>2.1<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td width=\"4\">\u00a0<\/td>\r\n<td>\r\n<p><strong><b>20<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>3.4<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p>This builds a strong retirement corpus with minimal intervention.<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<div id='text_slider_slide05' class='sa_hover_container' data-hash='Monitoring-and-Rebalancing-Your-Portfolio' style='padding:4.9% 5%; margin:0px 0%; background-color:rgb(255, 255, 255); min-height:405px; '><h2><strong><b>26.5 \u2013 Monitoring and Rebalancing Your Portfolio<\/b><\/strong><\/h2>\r\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-78012 size-full\" src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Monitoring-and-Rebalancing.png\" alt=\"Monitoring and Rebalancing\" width=\"1080\" height=\"1080\" srcset=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Monitoring-and-Rebalancing.png 1080w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Monitoring-and-Rebalancing-300x300.png 300w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Monitoring-and-Rebalancing-1024x1024.png 1024w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Monitoring-and-Rebalancing-150x150.png 150w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Monitoring-and-Rebalancing-768x768.png 768w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Monitoring-and-Rebalancing-50x50.png 50w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Monitoring-and-Rebalancing-100x100.png 100w, https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2026\/10\/Monitoring-and-Rebalancing-96x96.png 96w\" sizes=\"(max-width: 1080px) 100vw, 1080px\" \/><\/p>\r\n<p>Building a mutual fund portfolio is only the first step. The real challenge lies in monitoring its progress and rebalancing it periodically\u00a0to ensure it continues to serve your financial goals. Markets change, personal circumstances evolve, and risk tolerance shifts with age. A portfolio that was \u201cright\u201d five years ago may no longer be optimal today.<\/p>\r\n<p><strong><b>Why Monitoring Matters<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Market Cycles:<\/b><\/strong>Equity markets go through bull and bear phases. A portfolio heavily tilted towards equity during a bull run may become overexposed when the cycle turns.<\/li>\r\n<li><b><\/b><strong><b>Life Events:<\/b><\/strong>Marriage, children, career changes, or nearing retirement can alter your financial priorities.<\/li>\r\n<li><b><\/b><strong><b>Inflation and Costs:<\/b><\/strong>Education, healthcare, and lifestyle inflation can increase the required corpus for goals.<\/li>\r\n<\/ul>\r\n<p><strong><b>Frequency of Review<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Annual Review:<\/b><\/strong>At minimum, review your portfolio once a year.<\/li>\r\n<li><b><\/b><strong><b>Event-Based Review:<\/b><\/strong>Reassess after major life events (new job, home purchase, retirement planning).<\/li>\r\n<li><b><\/b><strong><b>Market-Based Review:<\/b><\/strong>If equity markets surge or crash significantly, check whether your asset allocation has drifted.<\/li>\r\n<\/ul>\r\n<p><strong><b>Rebalancing Strategy<\/b><\/strong><\/p>\r\n<p>Rebalancing means adjusting your portfolio back to its intended asset allocation.<\/p>\r\n<p><strong><b>Example:<\/b><\/strong><\/p>\r\n<ul>\r\n<li>Target allocation: 70% equity, 30% debt.<\/li>\r\n<li>After a bull run, portfolio becomes 80% equity, 20% debt.<\/li>\r\n<li>Rebalancing: Shift 10% from equity to debt to restore balance.<\/li>\r\n<\/ul>\r\n<p><strong><b>Table: Age-Based Allocation Guide<\/b><\/strong><\/p>\r\n<table>\r\n<tbody>\r\n<tr>\r\n<td>\r\n<p><strong><b>Age<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Equity Allocation<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Debt Allocation<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p><strong><b>Remarks<\/b><\/strong><\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>25\u201335<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>70\u201380%<\/p>\r\n<\/td>\r\n<td>\r\n<p>20\u201330%<\/p>\r\n<\/td>\r\n<td>\r\n<p>Aggressive growth phase<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>35\u201345<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>60\u201370%<\/p>\r\n<\/td>\r\n<td>\r\n<p>30\u201340%<\/p>\r\n<\/td>\r\n<td>\r\n<p>Balancing growth and stability<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>45\u201355<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>50\u201360%<\/p>\r\n<\/td>\r\n<td>\r\n<p>40\u201350%<\/p>\r\n<\/td>\r\n<td>\r\n<p>Preparing for retirement<\/p>\r\n<\/td>\r\n<\/tr>\r\n<tr>\r\n<td>\r\n<p><strong><b>55+<\/b><\/strong><\/p>\r\n<\/td>\r\n<td>\r\n<p>30\u201340%<\/p>\r\n<\/td>\r\n<td>\r\n<p>60\u201370%<\/p>\r\n<\/td>\r\n<td>\r\n<p>Capital protection focus<\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<p><strong><b>Additional Data Points to Track<\/b><\/strong><\/p>\r\n<ul>\r\n<li><b><\/b><strong><b>Rolling Returns: <\/b><\/strong>Check 3-year and 5-year rolling returns for consistency.<\/li>\r\n<li><b><\/b><strong><b>Expense Ratios: <\/b><\/strong>Ensure costs are not eating into returns.<\/li>\r\n<li><b><\/b><strong><b>Fund Manager Changes: <\/b><\/strong>A new manager may alter strategy.<\/li>\r\n<li><b><\/b><strong><b>Sector Exposure: <\/b><\/strong>Avoid over-concentration in one sector (e.g., banking or IT).<\/li>\r\n<li><b><\/b><strong><b>Global Diversification: <\/b><\/strong>Consider international funds for exposure beyond India.<\/li>\r\n<\/ul>\r\n<p><strong><b>Key Takeaways<\/b><\/strong><\/p>\r\n<ul>\r\n<li>Secure insurance and emergency corpus\u00a0before investing.<\/li>\r\n<li>Define goals with amount, time, and age.<\/li>\r\n<li>Use the cheat sheet to match funds with goals.<\/li>\r\n<li>Apply the elimination method to avoid unsuitable categories.<\/li>\r\n<li>Keep portfolios non-overlapping and diversified.<\/li>\r\n<li>Review annually, but avoid over-complication.<\/li>\r\n<\/ul>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p>\r\n<p>&nbsp;<\/p><\/div>\n<\/div>\n<\/div>\n<script type='text\/javascript'>\n\tjQuery(document).ready(function() 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src=\"https:\/\/www.5paisa.com\/finschool\/wp-content\/uploads\/2021\/10\/coming-soon-person-g8026473a8_1920-removebg-preview.png\" \/><\/p>                    <\/div>\n\t\t                    <\/div>\n        <\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Study Slides Videos 27.1 Setting the Stage This chapter introduces a relatively new category of funds in India \u2014 smart-beta funds and ETFs. Unlike traditional index funds that simply track a market-cap weighted benchmark (like Nifty 50), smart-beta funds use alternative methods of weighting stocks. For example, instead of giving more weight to companies with &#8230; <a title=\"Smart Beta Funds\" class=\"read-more\" href=\"https:\/\/www.5paisa.com\/finschool\/course\/financial-planning-through-mutual-funds-course\/smart-beta-funds\/\" aria-label=\"Read more about Smart Beta Funds\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"parent":11088,"menu_order":14,"comment_status":"closed","ping_status":"closed","template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[],"class_list":["post-78084","markets","type-markets","status-publish","format-standard","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/78084","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets"}],"about":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/types\/markets"}],"author":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/comments?post=78084"}],"version-history":[{"count":7,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/78084\/revisions"}],"predecessor-version":[{"id":78164,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/78084\/revisions\/78164"}],"up":[{"embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/markets\/11088"}],"wp:attachment":[{"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/media?parent=78084"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.5paisa.com\/finschool\/wp-json\/wp\/v2\/categories?post=78084"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}