A Quant and a Financial Planner Discuss Factor Investing

In this episode Matt and Jack look at factor investing from both the perspective of someone who builds quantitative strategies and someone who utilizes them. They discuss what factors are, why they work, the different ways to combine them into multi-factor portfolios, the importance of matching an investment strategy with the end user’s goals and risk tolerance, the important of human capital in portfolio construction and a lot more.

Quick Episode Links

02:55 – What is a factor?
06:04 – Durable opportunities and why factors work
09:05 – The trade-off between value and quality
12:03 – Isolating vs. blending factors
14:32 – Quant strategies vs. discretionary managers
16:08 – Breaking down active manager performance using factors
18:05 – Systematic and quantitative are not the same thing
19:59 – Focused vs. diversified factor investing
22:17 – Building multi-factor portfolios
24:26 – The two different methods to constructing multi-factor portfolios
27:29 – The nuances of multi-factor investing
28:41 – The most important factors in rebalancing decisions
30:21 – Analyzing multi-factor strategies
31:56 – Quants are subject to biases and emotions too
32:47 – How building multi-factor strategies is similar to creating music
37:32 – All value strategies aren’t the same
39:50 – The balance between investing and human capital
48:51 – The importance of outcomes in investing

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Originally Posted August 14, 2023 – A Quant and a Financial Planner Discuss Factor Investing

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