Combining factors to target specific investment outcomes
The potential merits of a factor-based approach to portfolio construction.
- When building portfolios with factors, investors can harness the risk and return characteristics of the individual factors themselves and achieve diversification by combining them.
- History suggests that a portfolio of six equity factors weighted equally has exhibited compelling results, including positive excess and higher risk-adjusted returns relative to the broader equity market.
- Equity factor allocations may also be fine-tuned to target specific outcomes, such as capital appreciation, downside protection, and income.
- Factor combinations can be used to create a core equity portfolio from the ground up, or to complement existing holdings.
Investments & portfolio construction
Manage client portfolios with greater efficiency and impact with our broad universe of portfolio construction solutions and investment products.
Learn more
Fidelity Portfolio Quick Check
Analyze, compare, and optimize your investment strategy in minutes with our free on-demand digital portfolio analysis tool.
Learn more
Advanced Modeling & Rebalancing
Take your portfolio strategies to the next level with our flexible, innovative portfolio construction and management tool.
Learn more
Diversification and asset allocation do not ensure a profit or guarantee against loss.
There is no guarantee that a factor-based investing strategy will enhance performance or reduce risk. Before investing, make sure you understand how a factor investment strategy may differ from a more traditional index-based or actively managed approach. Depending on market conditions, factor-based investments may underperform compared to investments that seek to track a market-capitalization-weighted index or investments that employ full active management.
For important information, see the full linked content.