Factor Investing is an investment strategy that selects securities based on specific characteristics (factors) that are believed to drive higher returns or reduce risk.
Factor Investing focuses on targeting key drivers of return such as value, size, momentum, quality, and low volatility. Instead of picking stocks randomly, investors build portfolios based on these proven factors.
It is widely used in smart beta funds and ETFs, combining active strategy with passive investing.
"An investor builds a portfolio focusing on undervalued (value factor) and high-growth stocks (growth factor) to maximize returns."