Equity factors—like Value, Growth, and Quality—offer a deeper lens on risk and return than traditional sector classifications. Our latest guide explores how factors work, the trade-offs of applying tilts, and what this means for building personalized portfolios.
Key Takeaways
- Ethic’s approach to factors: We use a multi-factor risk model to go beyond simple sector classifications, helping uncover the underlying drivers of performance and risk.
- Two ways to integrate factors: Investors can either use a factor-specific benchmark or apply tilts toward factors within a broader benchmark.
- Trade-offs to weigh: Factor tilts can affect portfolio flexibility, tax efficiency, and tracking error, making alignment with long-term goals essential.
At Ethic, we believe factors are a powerful tool for understanding risk and return. Unlike sectors, which group companies by industry, factors capture underlying characteristics—such as whether a stock is undervalued, growing quickly, or financially strong—that drive performance.
Our new guide, Unlocking Investment Potential: An Overview of Equity Factors, explains how we use a multi-factor risk model to capture these nuances and tailor portfolios to client objectives. Inside, you’ll find:
- A breakdown of the primary style factors (Value, Growth, Size, Quality, Low Volatility, and Momentum)
- An overview of the two main approaches to factor exposure
- A practical discussion of the trade-offs involved in applying tilts
Download the full PDF below
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Disclosures:
Ethic Inc. is a Registered Investment Adviser located in New York, NY. Registration of an investment adviser does not imply any level of skill or training. Information pertaining to Ethic Inc’s registration or to obtain a copy of Ethic Inc.’s current written disclosure statement discussing Ethic Inc.’s business operations, services and fees is available on the SEC’s Investment Adviser Public Information website – www.adviserinfo.sec.gov or from Ethic Inc. upon written request at support@ethicinvesting.com. Information provided herein is for informational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Any subsequent, direct communication by Ethic Inc. with a prospective client shall be conducted by a representative of Ethic Inc. that is either registered or qualifies for an exemption or exclusion from registration in the state where a prospective client resides. Information contained herein may be carefully compiled from third-party sources that Ethic Inc. believes to be reliable, but Ethic Inc. cannot guarantee the accuracy of any third-party information.
Ethic Inc. does not render any legal, accounting, or tax advice. Ethic Inc. recommends all investors seek the services of competent professionals in any of the aforementioned areas. Ethic Inc. cannot provide any assurances that any investment strategies, simulations, etc. will perform as described in our materials. ALL INVESTMENTS INVOLVE RISK, ARE NOT GUARANTEED, AND MAY LOSE VALUE. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY.