What is Factor Investing?

Factor investing has grown rapidly in popularity in recent years. It is one way of explaining the elements of a company's return.

For example, a company you've invested in has made a 10% return.

30% of that return is attributed to its momentum, or its direction of travel.

30% to its value - its intrinsic worth.

And 40% to macro factors like interest rates if it was a bank, for example.

Looking at factors or inputs into a company's investment return is a very helpful tool in assessing both your decision to invest in a company at that moment in time, as well as looking at the aggregate factors you may have across your portfolio.

There are two broad types of factor: style such as momentum, growth, value and macro - such as interest rates or inflation