Top Factor-Based ETFs for Diversified Smart Beta Investing

Factor investing traces its academic roots to the 1964 Capital Asset Pricing Model and gained significant traction after Eugene Fama and Kenneth French identified value and small-cap premiums in the 1990s. The term “smart beta” was coined by Willis Towers Watson in 2006, and today more than 1,000 smart beta ETFs trade on global exchanges, giving retail investors systematic access to return drivers that were once limited to institutional portfolios.

Five core factors have shown resilience across time, markets, and asset classes:

• Value: Targets stocks that appear undervalued on metrics like P/E and P/B — iShares MSCI USA Value Factor ETF (VLUE)
• Quality: Selects profitable, low-leverage companies with consistent earnings — iShares MSCI USA Quality Factor ETF (QUAL)
• Momentum: Follows stocks trending upward over the past 6–12 months — iShares MSCI USA Momentum Factor ETF (MTUM)
• Size: Focuses on smaller companies aiming to capture the small-cap premium — Vanguard Small-Cap Value ETF (VBR), iShares Russell 2000 Value ETF (IWN)
• Minimum Volatility: Picks stocks with historically lower price fluctuations to reduce drawdowns — Invesco S&P 500 Low Volatility ETF (SPLV), iShares MSCI USA Min Vol Factor ETF (USMV)

These factors can be grouped by behavior: value and size tend to be offensive (performing well in strong markets), quality and low volatility are defensive (holding up during downturns), and momentum is a trending factor that typically leads during expansionary periods.

Multifactor ETFs combine two or more of these exposures in a single fund. Because individual factors have varying correlations with each other — momentum, for example, has low correlation with both low volatility and value — blending them can soften drawdowns. Notable multifactor funds include Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC), iShares U.S. Equity Factor Rotation Active ETF (DYNF), and Vanguard U.S. Multifactor ETF (VFMF).

Most factor-based ETFs are passive, index-based funds. Index providers construct specialized indexes — selecting for “high quality” or “low volatility” stocks, for instance — and the ETF tracks that index, much like how a plain-vanilla fund such as SPY tracks the S&P 500. For broader ETF comparisons, see our complete list of ETFs or the largest ETFs by assets under management.

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The table below lists top factor-based ETFs with live pricing, performance data, and fund details.