The top minds in Economics have been trying to crack the code to profitable investing for over 40+ years.
They have finally found something practical and useful.
They found characteristics that are almost perpetually present in stocks that provided great returns. These characteristics are termed as ‘Factor’ and the methodology, Factor-Based Investing.
In this video, Alvin reviewed the book ‘Your Complete Guide to Factor-Based Investing’ by Andrew L. Berkin and Larry E. Swedroe.
He shares his biggest takeaway from this book, that will be very useful for small investors.
Look out for these tidbits in this video:
- 0:00 – Introduction to the book, and why is Alvin thinks this book will allow you to invest better
- 2:05 – What is Factor-Based Investing?
- 4:06 – The ‘Fathers’ of Factor-Based Investing and the pursue for greater investing returns
- 6:08 – 5 criteria that a Factor MUST meet in order to be valid (i.e. if a factor meets these criteria, you will be able to exploit it for higher returns)
- 11:38 – Factor #1, Market Beta
- 16:32 – Factor #2, Size
- 18:05 – Factor #3, Value
- 21:25 – Factor #4, Momentum
- 27:22 – Factor #5, Probability and Quality
- 30:07 – How you should choose and combine the Factors for Maximum Returns
References:
- Your Complete Guide to Factor-Based Investing by Andrew L. Berkin and Larry E. Swedroe
- The Cross-Section of Expected Stock Returns – Finance paper by Eugene Fama and Kenneth French in 1992
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