Research and Insights Library

What is Multi-Factor Investing?

This video about Multi-Factor® takes viewers through a brief history of factor-based investing and explains Gerstein Fisher’s own Multi-Factor® approach in easy-to-understand terms, reflecting our commitment to investor education and transparency of process.

 

The Science of Multi-Factor Investing

Factor-based investing has gained traction in our industry in recent years. More firms seem to be offering factor-based strategies, and a host of factor-based ETFs have cropped up. At Gerstein Fisher, we’ve been employing a multi-factor investment approach for nearly two decades, and we’re glad to see that many of our industry peers—as well as individual investors—are embracing it, too.

Amid the factor “hoopla,” we think it makes sense to take a step back and shed some light on what factor investing is really about: What is a factor? Why does this approach make sense? What research is there to support it?

In keeping with Gerstein Fisher’s strong commitment to investor and practitioner education, we’ve produced a short video that addresses some off these key questions.

Here are some highlights:

• At its core, factor-based investing is a way to look below the surface when analyzing stocks—to essentially uncover their “DNA.”
• To extend this analogy, research has found that certain security “chromosomes and genes” (factors) are associated with long-term investment outperformance.
• Some examples of rewarded factors include size (small cap), value, and momentum.
• Multi-factor investing seeks to identify and assemble portfolios of securities that possess these rewarded factors and assemble them in such a way as to optimize long-term, risk-adjusted portfolio performance.

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