Investing Ideas
Incorporating factor strategies into a style-investing framework
Passive investors can gain targeted exposure to value and growth companies with factor strategies.
Key Takeaways
- Passive investors who use a style framework to build portfolios can achieve targeted access to value and growth companies with factor strategies.
- Traditional style indexes may not offer pure exposure to value and growth stocks because they often must account for an entire stock universe.
- Value factor strategies can be more selective when identifying inexpensive stocks, so they often boast more targeted exposure to value companies.
- Momentum factor strategies have had higher realized earnings growth than traditional growth indexes over the long term.
- When combined, value and momentum factor strategies have the potential to provide more diversification than a combination of traditional value and growth style indexes, which simply offers broad-market exposure.
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Incorporating factor strategies into a style-investing framework
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Diversification does not ensure a profit or guarantee against a loss.
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