Explore Factor Investing

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Understand Factors

Discover What’s Driving Your Investments Think of factors as a deeper, more precise lens through which to view your investment portfolio. They’re the drivers of performance that can help explain an investment’s risk-return profile.

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Overview

Value, Size, Momentum, Low Volatility, Quality and Dividend Yield – each of these factors plays a role in the performance of your investment. Select a factor to learn more.

Adults browse a large table of used books representing factor investing and the value factor.

Applies to investments trading at discounts to similar securities, based on measures like book value, earnings or cash flow.

Dogs on leashes representing factor investing and the size factor.

Represents the potential higher-than-benchmark returns associated with relatively smaller stocks within the universe being considered.

Child on a swing representing factor investing and the momentum factor.

Identifies investments with positive momentum (recent strong returns) or negative momentum (recent weak returns) to calibrate portfolio exposure to either.

Woman floating in water by a beach representing factor investing and the low volatility factor.

Describes investments that consistently generate better risk-adjusted returns than riskier securities in the same asset class.

Hands display sparkling jewels representing factor investing and the quality factor.

Characterizes companies with strong measures of financial health, including a strong balance sheet and stable earnings growth.

Hands hold a bucket of ripe grapes representing factor investing and the dividend yield factor.

Reflects stocks that have paid higher yields and generated higher total returns over time than lower-yielding assets.

Select a factor allocation percent. Then see the difference in risk and return in the chart

Target Your Goals With Factors

Factors can help you build a portfolio targeted to your specific goals.

Choose one of the options below to see how factors may help you get where you want to go.

Background

What Did You Expect?

Higher returns for higher risk is an intuitive concept, but it’s not always accurate. Explore the allocation chart to see how adding the Low Volatility factor to a portfolio can affect risk and return.

Academic Backing

As early as 1972, Robert Haugen and James Heins uncovered a negative relationship between risk and return. They found that low-volatility stocks tended to outperform high-volatility stocks on a risk-adjusted basis over time. This unexpected result is called the low volatility anomaly.2

Leveraging the Anomaly

Allocating to Low Volatility can potentially smooth a bumpy ride. As this hypothetical chart shows, a 50/50 split between SPLV and the S&P 500 may have captured most of the market’s upside and less of its downside compared with the S&P 500 by itself.2

Playing Defense

Expecting volatile markets? Consider Low Volatility’s potential to help mitigate against losses in volatile markets. In this hypothetical scenario, allocating 75% to SPLV may have significantly softened the blow during the S&P 500’s worst drawdown period.

Low Volatility Factor Blend
Low Volatility Factor Blend 0%
Low Volatility Factor Blend 25%
Low Volatility Factor Blend 50%
Low Volatility Factor Blend 75%
Low Volatility Allocation 1
Worst Drawdown Up Capture Down Capture Beta Return
Factor Blend N/A N/A N/A N/A N/A
S&P 500 15.30% 1.00 1.00 1.00 13.22%
Worst Drawdown Up Capture Down Capture Beta Return
S&P 500 15.30% 1.00 1.00 1.00 13.22%
Worst Drawdown Up Capture Down Capture Beta Return
S&P 500 15.30% 1.00 1.00 1.00 13.22%
Worst Drawdown Up Capture Down Capture Beta Return
S&P 500 15.30% 1.00 1.00 1.00 13.22%
Source: Bloomberg L.P., May 31, 2011 – July 31, 2018. See standardized performance. Performance quoted is past performance and cannot guarantee of comparable future results; current performance may be higher or lower. Investment returns and principal value will vary; you may have a gain or loss when you sell shares. Market returns are based on the midpoint of the bid/ask spread at 4 p.m. ET and do not represent the returns an investor would receive if shares were traded at other times. Fund performance reflects fee waivers, absent which, performance data quoted would have been lower. SPLV's total expense ratio is 0.25%. Worst Drawdown represents the largest period of decline from peak to trough, May 31, 2011 to July 31, 2018.
Background

Focus on Return

Smaller companies may offer higher return potential than larger companies. Explore the Allocation chart to see the effect of adding the Size factor to a market portfolio.

Return Versus Risk

The Size factor seeks to capitalize on the observation that, within a given stock universe, smaller stocks tended to have higher returns than larger stocks. Investors may be rewarded for the additional risk inherent in relatively smaller securities.3

Academic Pedigree

Research into the Size factor was pioneered in 1981 by Rolf Banz of the University of Chicago. The Size factor’s long academic pedigree also includes confirmation by Kenneth French and Eugene Fama in 1992.3

Tilting to Size

Investors looking for above-market returns over a long time horizon may want to consider strategies tilted toward the Size factor. Investors need to be aware that the potential for higher returns may carry higher risk.

SIZE FACTOR BLEND
Size Factor Blend 0%
Size Factor Blend 25%
Size Factor Blend 50%
Size Factor Blend 75%
SIZE FACTOR ALLOCATION1
Return Up Capture Down Capture Beta
Factor Blend N/A N/A N/A N/A
S&P 500 9.86% 1.00 1.00 1.00
Return Up Capture Down Capture Beta
Factor Blend 10.23% 1.03 1.03 1.04
S&P 500 9.86% 1.00 1.00 1.00
Return Up Capture Down Capture Beta
Factor Blend 10.59% 1.07 1.06 1.07
S&P 500 9.86% 1.00 1.00 1.00
Return Up Capture Down Capture Beta
Factor Blend 10.94% 1.10 1.08 1.11
S&P 500 9.86% 1.00 1.00 1.00
Source: Bloomberg L.P., April 30, 2003 to July 31, 2018. See standardized performance. Performance quoted is past performance and cannot guarantee of comparable future results; current performance may be higher or lower. Investment returns and principal value will vary; you may have a gain or loss when you sell shares. Market returns are based on the midpoint of the bid/ask spread at 4 p.m. ET and do not represent the returns an investor would receive if shares were traded at other times. Fund performance reflects fee waivers, absent which, performance data quoted would have been lower. RSP's total expense ratio is 0.20%
Market cycle phases and factor performance behaviors

Invesco Can Help You See Your Portfolios More Clearly.

Clients rely on our combination of factor tools, expertise, products and services to help them achieve their portfolio objectives.

So whatever you’re striving for, we can help.

OUR FACTORS LINEUP
  1. An innovative blend of investing strategies
  2. Multi-asset, customized portfolios
  3. Innovative research
  4. Factor-based portfolio diagnostics
  5. Respected thought leadership and education programs

Coming Soon: Invesco Global Factor Investing Study 2018

Discover a unique global perspective on the latest factors trends and opportunities when our third annual Global Factor Investing Study arrives in November 2018.

You’ll see how factor investing is making a real difference in portfolio management. And you'll gain fresh insights from CEOs, industry leaders and specialists around the world.

Vincent de Martel, Solutions Strategist, North America

Vincent de Martel

Solutions Strategist
North America Spokesperson

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