Most Investors Get These Things Wrong About Factor Investing - We Explain the Facts
Two Quants and a Financial PlannerAugust 20, 202401:02:40

Most Investors Get These Things Wrong About Factor Investing - We Explain the Facts

In this episode, we explore common misconceptions about factor investing. We discuss why factors aren't less risky than the market, the challenges of diversification, and why adding more factors isn't always beneficial. We emphasize the importance of long-term perspectives when evaluating factor performance and the need for strategies to evolve with changing markets. We also touch on the emotional aspects of factor investing, the differences between academic studies and real-world implementation, and emerging ideas about factor design.

0:00 - Introduction
2:47 - Misconception 1: Factors are less risky than the market
8:10 - Misconception2: You can diversify the majority of that risk away
14:20 - Misconception 3: More factors are always better
18:32 - Misconception 4: Three and five-year periods are best for judging performance
26:21 - Misconception 5 - Factor outperformance is alpha
32:30 - Misconception 6: Factor investing is good for stock picking
39:31 - Misconception 7: The past is always predictive of the future
44:27 - Misconception 8: Factor strategies are set it and forget it
47:20 - Misconception 8: Factor investing is free of emotion
53:35 - Misconception 9: You should expect to match academic results in the real world
56:23 - Misconception 10: Factors have to make sense (maybe)
52:02 - Conclusion

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