All you need to know about factor-based investing
Investors use various strategies to maximise returns from stocks depending on the market performance and personal preferences or investing styles. One such strategy is factor-based investing.
In the 1960s, researchers introduced the capital asset pricing model, which defined the relationship between market risk and returns. This led to the evolution of a new investment strategy called ‘factor investing’, which took into account market risk, or beta, as an important factor impacting the returns of a security.
This strategy focuses on specific attributes or characteristics that drive the returns and risks of a security. Since the strategy is based on research and data, it removes emotional biases or guess work and leads to informed…
