Factor Investing Made Simple: How Smart Strategies Drive Better Returns

From Value to Momentum — How to Invest with Discipline and Data

Factor investing is a smart approach to investing that focuses on specific characteristics—or "factors"—that tend to drive better investment returns and manage risk. Think of it as picking stocks or assets not just randomly, but based on proven traits that have historically rewarded investors.

If you’re new to factor investing, this post will explain it clearly with everyday life analogies so you can see how it works both in markets and in your daily decisions.

What is Factor Investing?

At its core, factor investing seeks to identify and invest in stocks or assets based on measurable features linked to higher returns or lower risk. Instead of guessing, investors use data-driven factors that have been studied and tested over decades.

The most common "factors" include: