Factor Investing is an investment strategy that involves focusing on specific drivers of return in an attempt to beat the market and maximize returns. It is a style of investing which has experienced a surge in popularity and usually involves two main types of factors, namely macroeconomic factors and style factors. Examples of macroeconomic factors include inflation and real rates whereas style factors may vary from momentum to minimum volatility. Blackrock estimates that Factor-Based Strategies are projected to grow to the value of $3.4 trillion by 2022 from the level of $1.9 trillion at the beginning of the year. Given its popularity and capacity to grow in the coming years, this article will break down the top books, tools, podcasts, and blogs to expand your knowledge of Factor Investing.
Through these resources, you can begin your own Factor Investing portfolios, with pre-made quantitative strategies available on the Aikido Finance website along with rebalancing services available later this year.
One of the best books with regards to Factor Investing in What works on Wall Street by James P O’Shaughnessy. Published in 1996, this book provides insights into stock performance going all the way back to 1926. This book succeeds in outlining which investment strategies are winners and which are losers based on historical evidence and in a way that is clear and concise to even beginner investors. Included in this book is the debate between value and growth investing, small vs large-cap stocks, and whether these strategies work outside the United States. This book covers everything with regards to factor investing including up to 90 years of historical data such as ranking companies on sales, dividends, price-to-cash flow, and many more.
Another great book to begin understanding Factor Investing is the Acquirers Multiple by Tobias E. Carlisle. Published in October of 2017, this book offers new advice on how to beat the market through factor investing. Additionally, it serves as a guide on how to screen for undervalued stocks and provides knowledge on simple quantitative methods for investing in deep value stocks in an evidence-based passive approach to yield maximum returns.
Another informative book that investors should get their hands on to broaden their knowledge on Factor Investing is The Little Book that Beats the Market, written by Joel Greenblatt in 2006. Similar to the two aforementioned books, The Little Book that Beats the Market focuses on simple modern value investing principles through a quantitative and passive investment style. With over 300,000 printed copies sold, this book has established itself as a classic in financial literature and a necessity for people looking to learn about Factor Investing.
The Intelligent Investor by Benjamin Graham is commonly known as the definitive book on value investing with over one million hardcovers sold since its release. The new revised edition of this book preserves Graham’s original text whilst incorporates aspects and realities of today’s markets too, ensuring that this book is still of great use to readers today. Throughout the course of this book, Graham continually stresses the importance of passive investing while utilising factor styles.
Two more books of use to factor investors are Quantitative Value by Wesley Gray and Tobias Carlisle, and The Complete Guide to Factor Investing by Andrew Berkin and Larry Swedroe. Both of these books have been written by Asset Managers and explore different useful aspects of Factor Investing.
As previously mentioned, Factor Investing revolves around quantitative screening and focuses on either macroeconomic factors or style factors such as value and momentum. Therefore, websites offering easy access to a company’s financial ratios are of extreme benefit to investors taking a factor investing approach in their strategy. Websites such as Yahoo Finance and Morningstar are excellent websites for retrieving financial information on companies such as Net Income Growth, ROE, Dividend Yield, or any other ratio which may be applicable to your investment strategy.
Additionally, websites such as The Financial Times are of great benefit to users in expanding their knowledge of macroeconomic trends which can then be incorporated into the user’s strategy. MarketWatch is another useful website that provides economic articles on investment patterns as well as storing financial data for a large collection of listed companies. They also have trading simulators on their website which can be used to practice and test a variety of different Factor Investing styles.
QuantConnect is one of the top websites for back-testing a variety of different strategies and for incorporating quantitative passive strategies through the use of trading bots. The above websites will be of great benefit to anyone looking to expand their knowledge of Factor Investing.
Lastly, Aikido Finance serves as a top tool for investors looking to begin their factor investing journey. As previously mentioned, Aikido offers a vast variety of quantitative strategies on their website, varying from Gross Outperformance to Microcap Momentum. This ensures that there is a strategy available for each investor’s individual preference while maintaining a historical outperformance of the market. With portfolio rebalancing services coming soon, Aikido Finance has made Factor Investing even more simple for all beginner and experienced investors alike.
One of the best podcasts in Ireland for Factor Investing is the David McWilliams Podcast. Hosted by David McWilliams and John Davis, this podcast covers all aspects of economics which will be useful when focusing on the macroeconomic aspects of style investing. The aim of this podcast is to make economics easy and uncomplicated to its listeners and through this, you can begin applying knowledge such as interest rate or inflation projections into your investment decisions and strategies.
The Investor’s Podcast, also available on Spotify, covers a vast variety of investment topics, interviewing and studying famous financial billionaires such as Howard Marks and Warren Buffett. While this podcast covers everything from cryptocurrency investment strategies to the psychology of money, they also have dedicated podcasts on Factor Investing which will be of great benefit to interested individuals.
The Financial Times also have their own podcast for news briefing from between 8-10 minutes every morning. This podcast covers ongoing events in the financial world including company-specific news as well as macroeconomic and political events. Available on Google Podcasts, Apple Podcasts, and Spotify, this new briefing podcast is easily accessible to all who are interested and serves as an easy way to keep well informed in the world of finance.
Similar to the Financial Times, The BBC have their own podcast called Business Daily covering the similar macroeconomic event which will be of great benefit to listeners when incorporating macroeconomic factors such as inflation and real rates into their Factor Investing strategies. With an average length of about 16-19 minutes, this podcast provides finer details along with interviews from industry experts. This podcast is also available on Spotify, Apple Podcasts, and Google Podcasts as well as on the BBC website.
Motley Fool is a podcast that has a pure focus on just stocks and the factors that may affect the movement of the market. One of the most popular podcasts on Spotify, this podcast is of a very high standard. Similar to the previously mentioned podcasts, Chris Hill and his panel include interviews with industry experts and best-selling authors in their weekly episodes released on Fridays.
One excellent way viewers can expand their knowledge on both styles of investing and macroeconomic investing is by following and reading blog posts on a regular basis. One blog with high relevance to Factor Investing is that of Elm Partners. These blogs are based on the principles of indexing and long-term passive investing. The complete archive of these blogs can be found on the Elmwealth website.
Along with being an excellent website for factor investing resources, Morningstar also has a variety of authors who release blogs on a consistent basis, with many available for free on their website. These blogs can range from pure investing and markets to more macroeconomic topics too.
MSCI has a blog that is purely focused on factor investing with over 114 entries. With multiple blogs released every week, the MSCI website serves as an excellent resource for providing knowledge and information on Factor Investing. It is also possible to search easily through the existing blogs with a keyword filter on the website.
Quant Investing offers weekly articles on their blog geared towards value investing and stock screening. Recent articles released include “The Best Investment Strategy in Europe in 2020” and “Best EBIT to Enterprise Value Momentum Stock Ideas for 2021.
A blog for the more experienced investors would be Cliff’s Perspective by Cliff Asness, a quantitative investment manager for AQR Capital Management. This blog focuses on debating which factors are currently driving the stock market. While this blog is more infrequent than the previous blogs mentioned, each blog is extremely detailed and dense with important and useful information.
In contrast to this, a blog that still focuses on value investing but is more accessible to beginner investors is Value Walk by Jacob Wolinsky. Additionally, this blog is daily and has slowly started to branch out to incorporate more diverse content and emerging stories.
This article has broken down the aspects of Factor Investing and what it entails while also providing an extensive list of resources for readers to further expand their knowledge in this area. By incorporating these books, websites, tools, podcasts, and blogs into your day-to-day life you will significantly improve your financial knowledge particularly in the area of factor investing. Given its historical record of beating the market, Aikido Finance has also incorporated a variety of quantitative investing strategies on its website and, with portfolio rebalancing services also coming soon, the process of building an investment portfolio has been made even easier by Aikido Finance.