Investing Ideas

Incorporating factor strategies into a style-investing framework

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

By: Bobby Barnes Scott O’Reilly

Updated: 1/12/2024

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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