Advanced investment strategies can help you build wealth and further fine-tune your portfolio for your financial goals.
Explore our case study on active ETFs and discover how factor investing can be used to target more specific opportunities.
Investor decisions can be swayed by psychological biases such as loss aversion and overconfidence.
Advanced investment strategies can help you fine-tune your portfolio for your financial goals. We take a deeper dive into advanced concepts and examine how strategic decision-making can be used to build wealth.
In this article, we explore advanced techniques like factor investing and behavioural finance.
Read our case study on active exchange traded funds (ETFs) and discover how factor investing can target more specific investment opportunities and may help improve portfolio outcomes.
Advanced investment concepts can give you a deeper understanding of your portfolio. Looking at a portfolio’s factor exposures can give more insight into what’s driving your returns. And some advanced strategies use factor investing to target more specific opportunities.
Factor investing involves focusing on stocks based on specific attributes to potentially boost performance, improve diversification, and more. Examples of factors include:
Let’s take a deeper dive into how an active ETF (exchange-traded fund) might use this approach.
In this type of ETF, the investment fund is actively managed by a portfolio manager. The aim is to buy stocks or bonds that outperform a benchmark.
Portfolio managers can adjust positions depending on their investment objectives and the market cycle.
The costs are lower than a traditional fund. However, they are viewed as riskier than a passive ETF because the performance of the fund is based on investment decisions. Fees are higher than passive ETFs. There’s also a possibility the decisions could lead to the fund underperforming the index.
Let’s look at a case study of how an active ETF could work, with the Invesco Global Active ESG Equity UCITS ETF.
This ETF aims to achieve a long-term return in excess of the benchmark, the MSCI World Index, by investing in an actively managed portfolio of global equities that meets a defined set of environmental, social, and governance (ESG) criteria.
The team that manages the portfolio uses a quantitative model to select stocks based on factors like value, quality, and momentum. The fund's holdings are then rebalanced monthly to ensure they align with the desired investment strategy.
This example is for informational purposes only and this is not financial advice. Past performance is not necessarily an indicator of future performance and an index, stock, or bond can go down as well as up.
Please see the risk warnings below about the Invesco Global Active ESG Equity UCITS ETF1. Any investment decision should take into account all the characteristics of the fund as described in the legal documents. For sustainability related aspects, please refer to www.invescomanagementcompany.ie/dub-manco.
There are also other advanced strategies that investors can explore for deeper portfolio insights. For example, instead of simply looking at how much an investment has gained, exploring risk- adjusted returns can help you evaluate the profit of your investment relative to the risk taken. This can be assessed through metrics like the Sharpe Ratio and Sortino Ratio.
In addition to understanding your portfolio better, it’s also important to understand financial behaviours.
Investors‘ decisions can be swayed by psychological biases such as loss aversion and overconfidence. A disciplined approach can help you stick to your plan and not let your decisions be dictated by emotions during volatile markets.
Collectively, positive or negative sentiment, which is the overall mood investors have towards a stock or sector, can impact market movements. Market sentiment indicators can help assess whether there’s a potential investment opportunity — for example, if sentiment is causing an investment to be undervalued. On the flip side, positive sentiment can occur if investors feel confident about the future of a potential stock.
It’s also important to be strategic about your asset allocation. Opportunities can be found by balancing long-term allocations with tactical adjustments that capture short-term breaks in the market.
This might involve investing in specific sectors or asset classes that are expected to perform well in the near term.
You can optimise your strategy through advanced asset allocation techniques. This includes having a dynamic asset allocation, where positions are adjusted based on market conditions and economic cycles.
For example, a portfolio might be adjusted to stocks that perform well during economic expansions.
You can globally diversify your portfolio by incorporating international equities, bonds, and emerging markets. There are also alternative investments like real estate, private equity, and hedge funds, that offer unique opportunities in the market.
If you’re after more information, professional financial advisors can help you create a plan and stick to it. There’s always financial planning software and apps that can help you develop your strategy.
And of course, research tools are available for analysing markets and trends, while books, courses, and expert advice are other useful resources.
Advanced investment strategies could provide a pathway to achieving even the most ambitious financial goals. By applying these insights and continually refining your approach, you’ll be well-equipped to navigate any market environment.
Check out our other investment strategy videos. Find out the basics of ETFs and investment strategies or understand the principles of investing in funds.
April's fixed income markets saw mixed performance and volatility. Read our latest thoughts on how fixed income markets fared during the month and what we think you should be looking out for in the near term.
Dividend strategies can be valuable for investors looking to take income and for those wanting to build long-term wealth, while also focusing on low volatility stocks can help stabilise returns.
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1 The benchmark index is the MSCI World Index, and is shown for performance comparisons purposes only. The fund does not track the index.
An investment in this fund is an acquisition of units in an actively managed fund rather than in the underlying assets owned by the fund.
Any investment decision should take into account all the characteristics of the fund as described in the legal documents. For sustainability related aspects, please refer to www.invescomanagementcompany.ie/dub-manco
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
For complete information of risks, refer to the legal documents.
Invesco Global Active ESG Equity UCITS ETF
The Fund may be exposed to the risk of the borrower defaulting on its obligation to return the securities at the end of the loan period and of being unable to sell the collateral provided to it if the borrower defaults. The Fund intends to invest in securities of issuers that manage their ESG exposures better relative to their peers. This may affect the Fund’s exposure to certain issuers and cause the Fund to forego certain investment opportunities. The Fund may perform differently to other funds, including underperforming other funds that do not seek to invest in securities of issuers based on their ESG ratings. The value of equities and equity-related securities can be affected by a number of factors including the activities and results of the issuer and general and regional economic and market conditions. This may result in fluctuations in the value of the Fund. The Fund’s performance may be adversely affected by variations in the exchange rates between the base currency of the Fund and the currencies to which the Fund is exposed.
Currency hedging between the base currency of the Fund and the currency of the Share class may not completely eliminate the currency risk between those two currencies and may affect the performance of the Share class.
Data as at 10th March 2025.
This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.
Views and opinions are based on current market conditions and are subject to change.
The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI Inc (“MSCI”), and MSCI bears no liability with respect to any such funds or securities or any index on which such funds or securities are based.
UCITS ETF’s units / shares purchased on the secondary market cannot usually be sold directly back to UCITS ETF. Investors must buy and sell units / shares on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current net asset value when buying units / shares and may receive less than the current net asset value when selling them.
For the full objectives and investment policy please consult the current prospectus.
If investors are unsure if this product is suitable for them, they should seek advice from a financial adviser.
Invesco Investment Management Limited, Ground Floor, 2 Cumberland Place, Fenian Street, Dublin 2, Ireland. Regulated by the Central Bank in Ireland.
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