In today’s investment landscape, advisers often face a choice between active and passive approaches. Factor investing offers a powerful alternative that combines the efficiency of passive investing with the targeted precision of active strategies.
This rules-based method focuses on measurable traits—such as value, size, quality, momentum, and low volatility—that have been shown to influence returns over time, supported by decades of academic research and real-world data.
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Why Factors Matter
Factors behave differently depending on market conditions. Cyclical factors like value, size, and momentum tend to shine in growth periods, while defensive factors like quality and low volatility often provide stability during downturns. By blending these, advisers can help clients benefit from growth opportunities while managing downside risk.
Timeline’s Approach
At Timeline, we favour a “Market plus satellite” strategy. This keeps market exposure at the core while adding select factors—primarily value and size—for their proven long-term performance. We also incorporate high-quality, profitable companies for defensive strength, aiming to outperform broad market portfolios over time while managing costs and risk.
Evidence-Based Support from Dimensional
Research from Dimensional Fund Advisors shows that integrating size, value, and profitability premiums systematically can enhance long-term outcomes. Their multifactor solutions demonstrate how careful implementation can turn academic theory into tangible client benefits.
Key Takeaways for Advisers
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Factor investing bridges passive efficiency and active insight.
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Combining cyclical and defensive factors enhances portfolio resilience.
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A disciplined, evidence-based process can improve client outcomes.
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