Smart Beta is an investment strategy that combines elements of traditional indexing and active management. Unlike standard index funds that track a market index based solely on market capitalization, Smart Beta portfolios use alternative factors, such as value, momentum, or volatility, to select and weight securities. This approach aims to enhance returns and reduce risk compared to traditional methods. By focusing on specific factors, Smart Beta seeks to capture systematic risk premiums that can lead to better long-term performance. Investors can access Smart Beta strategies through exchange-traded funds (ETFs) or mutual funds, making them a popular choice for those looking to diversify their portfolios while maintaining a rules-based approach.