Factor Investing & Asset Allocation

Factor Investing & Asset Allocation


Factor Investing is a popular investment approach consisting of finding quantifiable attributes of companies that are associated with their future performance for a given period of time. This factors can then be used to construct a portfolio that goes long the top stocks and short the bottom ones in order to profit from the spread between the two groups.

On the other hand, Asset Allocation refers to strategies that attempt to balance risk/reward according to an investor's risk tolerance by dynamically allocating among different asset classes (equities, fixed-income, cash equivalents) that behave differently over time.