New frontiers in factor investing

Momentum, volatility, quality and more – Morningstar’s new Factor Profile shows you the exposure of your funds to key drivers of risk and return

Andrew Willis 27 January, 2020 | 1:59AM
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Andrew Willis: A factor is a common set of characteristics, like low valuations or market capitalization, that can help explain and predict asset risks and returns. Factor investing is a method of choosing securities based on the factors that could generate the highest possible return.

For example, over the long-term certain characteristics like low valuations, large companies and strong recent performance, have tended to generate higher returns than the market – These “characteristics” could be called over the long term, quality, size and momentum factors.

At Morningstar, we identify seven factors that we believe can help investors gain new insights into their portfolio: Style, Yield, Momentum, Quality, Volatility, Liquidity, and Size.

While it could be relatively easy to tell some factors for an individual stock, how do you know what factors your fund holds? Well now, you can tell with the new Morningstar Factor Profile. This new feature, available under the ‘portfolio tab’ of fund pages, immediately evaluate the factors affecting your funds to enhance diversification, better manage risk, and increase your odds of generating above-market returns.

For Morningstar, I’m Andrew Willis

Get to know the seven factors and Morningstar’s new Factor Profile

Build a better portfolio here

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About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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