Incorporating Factor Strategies into a Style-Investing Framework

Posted: {{contentManager.articlePostedDate}} by Fidelity Research Institute

Passive investors can gain targeted exposure to value and growth companies with factor strategies.

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Key Insights

  • 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 offer broad-market exposure.
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