4 key applications of equity factor-based investing
18 November 2018 | Investing
In contrast to traditional active management, equity factor-based investing offers the benefits of lower costs, great transparency and more control over performance drivers and risk exposure. How can investors exploit these benefits in portfolio construction?
Here are four key factor applications that help investors achieve specific risk or return objectives.
Funds that concentrate on a relatively narrow market sector face the risk of higher share-price volatility.
Diversification does not ensure a profit or protect against a loss.
All investing is subject to risk, including possible loss of principal.
Factor funds are subject to investment style risk, which is the chance that returns from the types of stocks in which the fund invests will trail returns from broader stock markets. Factor funds are subject to manager risk, which is the chance that poor security selection will cause the fund to underperform relevant benchmarks or other funds with a similar investment objective.
This material is for distribution to “Professional Investors” (as defined in the Securities and Futures Ordinance (Cap. 571 of the laws of Hong Kong) and any rules made under that ordinance) only. It is not intended for and should not be distributed to, or relied upon, by members of the public or retail investors in Hong Kong.
The contents of this document and any attachments/links contained in this document are for general information only and are not advice. Investment involves risks. Past performance is not indicative of future results. The information does not take into account your specific investment objectives, financial situation and individual needs and is not designed as a substitute for professional advice. You should seek independent professional advice regarding the suitability of an investment product, taking into account your specific investment objectives, financial situation and individual needs before making an investment.
The contents of this document and any attachments/links contained in this document have been prepared in good faith. Please note that the information may have become outdated since its publication, and any information sourced from third parties is not necessarily endorsed by The Vanguard Group, Inc., and all of its subsidiaries and affiliates (collectively, the “Vanguard Entities”).
This document contains links to materials which may have been prepared in the United States and which may have been commissioned by the Vanguard Entities. They are for your information and reference only and they may not represent our views. The materials may include incidental references to products issued by the Vanguard Entities.
The information contained in this document does not constitute an offer or solicitation and may not be treated as an offer or solicitation in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The Vanguard Entities may be unable to facilitate investment for you in any products which may be offered by the Vanguard Group, Inc.
No part of this document or any attachments/links contained in this document may be reproduced in any form, or referred to in any other publication, without express written consent from the Vanguard Entities. Any attachments and any information in the links contained in this document may not be detached from this document and/or be separately made available for distribution.
This document is being made available in Hong Kong by Vanguard Investments Hong Kong Limited (CE No. : AYT820) (“Vanguard Hong Kong”). The contents of this document have not been reviewed by the Securities and Futures Commission in Hong Kong.