Intelligent ETF

AAA

DEFINITION of 'Intelligent ETF'

An exchange-traded fund (ETF) that employs an active investment strategy based on a broad index, such as the S&P 500 or a sector-based index. The fund may choose to exclude some stocks within the index while increasing or decreasing the percentage weighting of other stocks. Most intelligent ETFs carry higher expense ratios than standard ETFs, as well as substantially higher turnover ratios.

Also known as a "smart ETF."

INVESTOPEDIA EXPLAINS 'Intelligent ETF'

Many of these "intelligent" or "smart" ETFs originated in the aftermath of the 2000-2002 bear market. Most intelligent ETFs look to avoid market capitalization-weighted portfolios, instead using internal metrics (or black box systems), such as company fundamentals or share performance.

Any ETF or index fund that does not replicate a base index is not passive investing, meaning that the fund's returns could deviate markedly from the returns of the benchmark index. Some intelligent ETFs have internal or proprietary indexes that are merely replicated within the ETF, but this is still active investing, and many of the internal indexes cannot be readily examined.

VIDEO

Loading the player...
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Biotechnology Industry ETF

    An exchange-traded fund that invests specifically in the rapidly ...
  3. Enhanced Index Fund - EIF

    A mutual fund that tracks a stock market index, but with certain ...
  4. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  5. Passive Investing

    An investment strategy involving limited ongoing buying and selling ...
  6. Black Box Model

    A computer program into which users enter information and the ...
RELATED FAQS
  1. How does beta measure a stock's market risk?

    Beta is a statistical measure of the volatility of a stock versus the overall market. It's generally used as both a measure ... Read Full Answer >>
  2. What is the average annual return for the S&P 500?

    According to historical records, the average annual return for the S&P 500 since its inception in 1928 through 2014 is ... Read Full Answer >>
  3. What types of stocks have a large difference between bid and ask prices?

    The bid-ask spread is the difference between the highest offered purchase price and the lowest offered sales price for a ... Read Full Answer >>
  4. What happens to the shares of a company that has been the object of a hostile takeover?

    The shares of a company that is the object of a hostile takeover rise. When a group of investors believe management is not ... Read Full Answer >>
  5. What are the most common leveraged ETFs that track the drugs sector?

    The most common leveraged exchange-traded funds (ETFs) that track the pharmaceutical industry are the two offered by Proshares: ... Read Full Answer >>
  6. Why would an investor consider purchasing electronic stocks for their portfolio?

    An investor would consider purchasing electronics stocks because that sector provides many opportunities for both quick profits ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    ETFs Vs. Index Funds: Quantifying The Differences

    If you are trying to choose between these two index-tracking investments, compare the costs.
  2. Mutual Funds & ETFs

    All Weather Investing With ETFs

    All Weather investment strategies can shield investors during the worst bear markets.
  3. Mutual Funds & ETFs

    Sharpen Your Portfolio With Intelligent ETFs

    Intelligent ETFs are innovative funds that pursue above-average returns and can be similar to actively managed mutual funds.
  4. Mutual Funds & ETFs

    3 Steps To A Profitable ETF Portfolio

    Achieve your investing goals with this simple process.
  5. Mutual Funds & ETFs

    Benchmark Your Returns With Indexes

    If your portfolio is always falling short, you may not be making an apples-to-apples comparison.
  6. Mutual Funds & ETFs

    Mutual Fund Or ETF: Which Is Right For You?

    Learn the differences between these investment products and how to take full advantage.
  7. Mutual Funds & ETFs

    Enhanced Index Funds: Can They Deliver Low-Risk Returns?

    These funds may look appealing. Find out whether they can really live up to all of their promises.
  8. Mutual Funds & ETFs

    Exchange-Traded Funds (ETFs)

    This vehicle combines the diversification of a mutual fund with the flexibility of a stock. Learn more about them here.
  9. Mutual Funds & ETFs

    Is the PowerShares (PFEM) ETF a Good Bet Now?

    What you need to know if you are considering trading PowerShares Fundamental Emerging Markets Local Debt ETF.
  10. Chart Advisor

    Invest in Japan with this ETF

    The Japanese stock market has been front and center in the minds of many international traders over the past few weeks — and for good reason.

You May Also Like

Hot Definitions
  1. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  2. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  3. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  4. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
  5. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
Trading Center