Factor It In

Want to know what's impacting a portfolio's performance? Invesco's expertise in factor investing can help you make sense of it all.

Understand Factors

Discover what's driving your investmentsThink 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.

Man shakes a woman’s hand representing factor education and understanding.

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.

Man shakes a woman’s hand representing factor education and understanding.

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 demonstrated lower volatility than 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
Background

Target
Investment
Goals With Factors

Factors can help build portfolios targeted to specific goals.

Choose one of the options below to see how factors may help address risk and return goals.

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.1

Leveraging the Anomaly2

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.

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.

About Hypothetical portfolios
The information illustrated in the scenarios are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. These scenarios are for illustrative purposes only and should be used as a guide to helping evaluate a factor allocation. The proposed scenarios were chosen to illustrate the potential effect of adding factor strategies to market portfolios. In the scenarios, the Factor Blend represents the addition of a factor-based product to the S&P 500 at 25, 50 and 75 percent increments. SPLV was used to show the effects on risk; RSP was used to show the effects on return. Risk is represented by standard deviation. Standard deviation measures a fund’s range of total returns and identifies the spread of a fund’s short-term fluctuations. An investor cannot invest directly in an index. The results assume that no cash was added to or assets withdrawn from the Index. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.
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
Worst
Drawdown
Up
Capture
Down
Capture
Beta Annualized
Return
Factor
Blend
N/A N/A N/A N/A N/A
S&P
500
15.30% 1.00 1.00 1.00 13.48%
Worst
Drawdown
Up
Capture
Down
Capture
Beta Annualized
Return
S&P
500
15.30% 1.00 1.00 1.00 13.48%
Worst
Drawdown
Up
Capture
Down
Capture
Beta Annualized
Return
S&P
500
15.30% 1.00 1.00 1.00 13.48%
Worst
Drawdown
Up
Capture
Down
Capture
Beta Annualized
Return
S&P
500
15.30% 1.00 1.00 1.00 13.48%
Source: Bloomberg L.P., May 31, 2011 – Sept. 30, 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. Fund performance is at NAV and reflects fee waivers, absent which, performance data quoted would have been lower. SPLV rebalances quarterly and has a total expense ratio of 0.25%. Worst Drawdown represents the largest period of decline from peak to trough during the period May 31, 2011 to Sept. 30, 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.

About Hypothetical portfolios
The information illustrated in the scenarios are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. These scenarios are for illustrative purposes only and should be used as a guide to helping evaluate a factor allocation. The proposed scenarios were chosen to illustrate the potential effect of adding factor strategies to market portfolios. In the scenarios, the Factor Blend represents the addition of a factor-based product to the S&P 500 at 25, 50 and 75 percent increments. SPLV was used to show the effects on risk; RSP was used to show the effects on return. Risk is represented by standard deviation. Standard deviation measures a fund’s range of total returns and identifies the spread of a fund’s short-term fluctuations. An investor cannot invest directly in an index. The results assume that no cash was added to or assets withdrawn from the Index. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.
SIZE FACTOR BLEND
Size Factor Blend 0%
Size Factor Blend 25%
Size Factor Blend 50%
Size Factor Blend 75%
SIZE FACTOR ALLOCATION
Annualized
Return
Up
Capture
Down
Capture
Beta
Factor
Blend
N/A N/A N/A N/A
S&P
500
10.02% 1.00 1.00 1.00
Annualized
Return
Up
Capture
Down
Capture
Beta
Factor
Blend
10.36% 1.03 1.03 1.04
S&P
500
10.02% 1.00 1.00 1.00
Annualized
Return
Up
Capture
Down
Capture
Beta
Factor
Blend
10.68% 1.06 1.06 1.07
S&P
500
10.02% 1.00 1.00 1.00
Annualized
Return
Up
Capture
Down
Capture
Beta
Factor
Blend
11.00% 1.09 1.08 1.11
S&P
500
10.02% 1.00 1.00 1.00
Source: Bloomberg L.P., April 30, 2003 to Sept. 30, 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. Fund performance is at NAV and reflects fee waivers, absent which, performance data quoted would have been lower. RSP rebalances quarterly and has a total expense ratio of 0.20%.
Market cycle phases and factor performance behaviors

Invesco Can Help Advisors See Their Clients' Portfolios More Clearly.

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

So whatever advisors are 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

Introducing our 2018 Global Factor Investing Study

We’re pleased to unveil the third edition of the Invesco Global Factor Investing Study. Based on interviews with more than 300 institutional and wholesale investors around the world, plus a series of case studies, this report is one of the largest in-depth analyses of global factor investing being undertaken at the current time.

Vincent de Martel, Solutions Strategist, North America

Vincent de Martel

Solutions Strategist
North American Spokesperson

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