For decades, Burton Malkiel has been a leading advocate of the efficient market hypothesis and its logical extension, the low-cost, passive approach to investing -- as outlined in his bestselling book, "A Random Walk Down Wall Street." Dr. Malkiel is a Princeton economist and Chief Investment Officer of a robo-adviser, Wealthfront.

I had the opportunity to chat with Dr. Malkiel recently about smart beta, his Wealthfront portfolios, and how investors should think about rock-bottom interest rates. 

You’ve been a vocal critic of smart beta.

My sense is that the factors behind smart beta are not dependable. Where they may work, they undoubtedly involve more risk. When I have examined the smart beta ETFs that have been in existence, I did not find that – after expenses – they have given investors a better risk-reward tradeoff.

I therefore conclude that it’s probably more that smart beta gives managers an opportunity to charge higher fees, and this is not necessarily good for investors. I remain convinced that a straight capitalization-weighted, broad-based index fund is still the best way for individuals to invest.

What if you could buy a U.S. large cap value ETF for the same low 0.05 percent expense ratio as a Vanguard S&P 500 ETF?

It would clearly be a much better product for the investor and I would certainly like that a lot better. If you were convinced that value was the best way to invest and you could get it for five basis points, I certainly wouldn’t object to anyone buying it.

So, yep, you could do it if you wanted at a low fee, but just be very careful and don’t expect any consistency from smart beta factors even though historically you can find periods where they’ve worked.

Is there a benefit to diversifying across smart beta styles?

If you want a portfolio that has a diversified number of styles, that is the market cap portfolio.