 "funds")
Factor-based funds, also called smart-beta funds, have done well year-to-date. Momentum-based factor funds have outperformed owing to high momentum in the equity market in recent times.
The broad-based nature of the rally has helped the equal-weight strategy do well. But before you decide to invest in these funds, understand how they work.
What is a factor-based fund?
These are rule-based funds. A universe is defined and then a few filters (or criteria) are applied to it. The stocks obtained are ranked in descending order. Those that rank higher are given a higher weight in the factor index.
An index like
