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RL155 — Factor-Based Investing

On the Retirement Lifestyle Show, Roshan Loungani, Erik Olson, and Adrian Nicholson break down Factor investing and why it’s such an effective investment strategy. They cover topics like the basics of Factor investing, the diverse approaches to multi-factor investing, and smart investing approaches to help you beat the market and maximize returns. Listen now to hear the break down of Factor-Based Investing.

[00:00] Introduction

[04:48] Why Most People are Research-based Investors

[07:00] What is Factor Investing?

[12:16] Common Attributes of Factor Investing

[15:47] Understanding Multi-Factor Investing

[18:20] The Common Sense Test

[21:22] How to Protect Yourself from Risky Investing

[26:30] The Momentum with Volatility Control Strategy

[31:10] Comments on The Momentum with Volatility Control Strategy

[35:50] The Basics of the Value, Quality, Momentum, and Timing Strategy

[38:58] Unique Measures of Value

[43:27] Analyzing a Snapshot of a Morningstar Portfolio

[47:15] Weighting and Stock Analysis

[50:43] The Tremendous Outperformance of Growth Versus Value

[55:30] Why Investors Must be Willing to Endure Periods of Underperformance

[57:55] The Quality, Larger Value with Income Strategy

[01:05:55] Performance Numbers and Why Investment Strategies Behave Differently

[01:10:45] Resources for Factor Investing

[01:13:52] Parting Thoughts

To read the Full Show Notes scroll down or click here.

  • Roshan Loungani can be reached at roshan.loungani@aretewealth.com or at 202-536-4468.
  • Erik Olson can be reached at erik.olson@aretewealth.com or 815-940-4652.
  • Adrian Nicholson can be reached at adrian.nicholson@aretewealth.com or at 703-915-8905

Listen now to hear the break down of Factor-Based Investing.

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stock market investing and Factor-Based Investing

Full Show Notes:

What is Factor-Based Investing?

Factor-based investing is an investment strategy that focuses on capturing returns from underlying factors such as size, value, momentum, and quality of a security. The idea is that these factors have a persistent effect on returns and can be used to build portfolios with enhanced risk-adjusted returns. Factor investing relies on its ability to deliver returns that are uncorrelated with traditional market indices while providing diversification benefits. Additionally, factor investing can help investors achieve specific investment objectives, such as enhancing risk-adjusted returns or tilting portfolios towards a desired factor exposure. 

 

By incorporating factors into your investment strategy, you can achieve higher risk-adjusted returns and build a more diversified investment portfolio. However, just like most investment strategies, Factor investing is only ideal for some people and won’t necessarily work in your portfolio. 

 

Why You Need to Find Your Investment Personality

One of the main drivers of investment success is finding your investment personality. This involves understanding your financial goals, risk tolerance, and investment style. If you invest in something you’re not comfortable with, you won’t have the level of comfort it takes to get through difficulties in a down market.

 

To find your investment personality, start by assessing your goals and evaluating your risk tolerance. You should also consider your investment style, reflect on past experiences, and seek the advice of a financial advisor before making huge decisions. Your personality will ultimately help you make informed investment decisions that allow you to weather the storm during a down year.

 

Links and Resources:

Disclaimer Welcome, you are now listening to the retirement lifestyle show with Roshan Loungani Erik Olson and Adrian Nicholson. This show is an exploration of ideas to help you work towards your ideal retirement. Roshan Loungani and Erik Olson serve clients across the US. They offer financial planning and investment advice through Arete Wealth Advisors, LLC, an SEC registered investment advisor and securities through Arete Wealth Management LLC, member FINRA, SIPC, and NFA. Get ready for the financial independence of your dreams. All opinions expressed by podcast hosts and guests are solely their own are based on information they believe is reliable. Neither Arete Wealth nor its affiliates, warrants its completeness or accuracy, nor do their opinions reflect the opinion of Arete Wealth. This podcast is for general informational purposes only and should not be regarded as specific advice or recommendations for any individual. Before making any decisions consult a professional. Finally, our music is the chance by Jason Shaw and Audionautix. It’s part of the YouTube Audio Library and it’s licensed under a Creative Commons license.

Thank you for listening.

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Advisory services offered through Arete Wealth Advisors, an SEC registered investment advisor.

Securities offered through Arete Wealth Management, LLC, member FINRA, SIPC and NFA.

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