personal-finance
Factor investing: New way to pick stocks
Jul 29, 05:07

Fund houses are slowly warming up to factor investing. These schemes do not actively pick and choose stocks. But they aren't completely passive either. Factor investing involves choosing securities based on certain rules, which are pre-decided. These rules or factors include picking stocks based on criteria like momentum, volatility and size (market capitalisation of a company). These funds are also called smart-beta funds. The stock of a company that scores high on a particular factor typically does well over that with low scores. For example, a high growth demonstrating company's stock outpaces the rise of a low growth company's, other things remaining the same.

Funds bet on smart beta