Diversify Your Risk Exposure With Factor Investing
from Complete Algo Trader Hosted by Justin Jimenez
Increase your chances of catching a rising trend with this new portfolio management technique! You may not feel this way, but for many investors and traders, the stock market is a game, and we all want to move up on the leaderboard. That’s really why you’re here right? You want to beat the market, just like every other investor. I do too; that’s why I research portfolio management theory, and it’s why I write these stories. In my last story, I explored how to increase your portfolio returns using different portfolio management strategies. If you read that story, you would have learned how you can optimize your portfolio’s weight distributions to match your desired balance between risk and return while simultaneously multiplying your gains. In this story, I want to revisit one of the earlier steps of that process that I skimmed over — how do you actually determine which stocks will give you the best return? To answer this question, I’m going to share a method with you called factor investing. I found this topic to be relatively easy to implement but also incredibly arduous to fully comprehend. I’m going to break down the concepts as best as I can. By the end of this story I want you to walk away with an understanding of the relationship between risk and return; what factor investing is; how to implement a multi-factor model; and how to evaluate different models. Click here to continue reading my story on Data Driven Investor!
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