Small Cap Dividend Factor US Stocks

Smart Beta Portfolios (Interactive Advisors Portfolios)

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0.20% annual

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Small-capitalization US stocks only

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$100

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The brochure just says "small-capitalization company versions of the above five portfolios" and gives no individual names.

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Not available

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The Small Cap Dividend portfolio gives investors structured access to smaller U.S. companies that pay above-average dividends relative to their small-cap peers. Using a factor-based selection process, it identifies stocks that blend the growth potential of small-cap businesses with steady income generation. The portfolio aims to deliver a more favorable risk-return balance than traditional market indexes by emphasizing dividend-paying companies across a broad range of sectors. This diversified approach combines the earning power of dividends with the capital growth opportunity that smaller companies can offer.

Interactive Advisors is an established name in the field of online investing, with a history of path-breaking work. The platform offers a variety of portfolios, including the Smart Beta portfolios, which are managed by Interactive Advisors's Chief Investment Officer and Investment Management team. The “Smart Beta” approach to portfolio construction is grounded in academic research. The goal of this strategy is to achieve an alternative risk-return profile which is more attractive than a simple capitalization-weighted index such as the S&P 500. Interactive Advisors Smart Beta portfolios follow rules-based investment strategies designed to provide systematic exposure to a fundamental factor or combination of factors.

Capital growth plus with a more complex portfolio or higher risk profile than broad equity markets. Investing in equities and concentrated portfolios and prepared to accept fluctuation in portfolio value.

Income-seeking investors: If you want to earn regular dividend income while also gaining exposure to smaller, potentially faster-growing companies, this portfolio bridges both goals through a single allocation. However, small-cap dividend yields are typically lower than those of large-cap dividend-focused strategies, as smaller companies often reinvest more earnings into growth. Small-cap diversifiers: Investors who want access to the small-cap segment of the U.S. equity market but prefer a broadly diversified, measured approach rather than concentrated bets on individual stocks. Rules-based believers: If you value a transparent, systematic investment process that removes emotional decision-making, this portfolio uses a quantitative framework that rebalances quarterly based on clear, consistent criteria.

Research: The portfolio's construction draws on academic research into factor-based investing. Interactive Advisors conducted extensive research and back-testing to identify the specific factors and rules that guide stock selection. The goal is to pursue a risk-return profile that may be more attractive than a simple market-cap-weighted index such as the Russell 2000. Approach: The portfolio follows a systematic, rules-based process to determine which stocks are included and how positions are sized. It is rebalanced on a quarterly basis, with stocks offering higher dividend yields receiving greater consideration for inclusion. Allocation discipline: The portfolio holds approximately 300 individual positions, offering broad coverage of the small-cap universe. Higher-yielding stocks receive larger weightings, tilting the overall allocation toward dividend income. To manage risk, the construction process curbs exposure to the most volatile names and guards against overconcentration in any one sector. Sell discipline: Sell decisions follow the quarterly rebalance schedule. Stocks that no longer meet the dividend yield criteria are replaced by those with more favorable yields, keeping the portfolio aligned with its income-focused objective. Exceptions: Positions in stocks undergoing corporate actions may be sold or adjusted outside the regular rebalance cycle. Performance is calculated using the then-applicable 0.08% management fee until March 1, 2024, and the currently applicable 0.20% management fee as of March 1, 2024.

Built-in income stream: This portfolio prioritizes stocks with attractive dividend yields among small-cap companies, providing regular dividend income on top of any potential price appreciation from smaller, growth-oriented companies. Broad small-cap exposure: With a target of 300 holdings, the portfolio spreads your investment across a wide range of smaller U.S. companies, reducing the impact any single stock can have on your overall returns. Disciplined risk controls: The systematic construction process incorporates measures to help manage the higher volatility that often accompanies small-cap investing, helping you pursue dividend income without taking on outsized exposure to any single corner of the market.