Introduction to the Video
When it comes to investing, there are three broad types of funds to consider: active funds, passive funds, and factor funds. While evidence shows that paying for actively managed funds often isn’t worth it, some investors opt for low-cost passive index funds that track the whole market. For those willing to take on more volatility, factor funds offer a potential path to beating the market.
In this video, Gerard O’Reilly from Dimensional Fund Advisors explains how factor investing works by targeting specific risk factors, such as size, value, and profitability, to increase expected returns. By understanding these factors, investors can potentially lower their current savings rate or enjoy greater consumption in the future.
However, factor investing requires a disciplined and methodical approach. O’Reilly stresses the importance of maintaining diversification, minimising costs, and avoiding excessive portfolio turnover to ensure that factor investing improves your overall portfolio without introducing unnecessary risks.
If you’re considering factor investing, this video provides clear guidance on which factors to focus on and how to integrate them into a well-constructed portfolio. While success is not guaranteed, patience and discipline can give you a better chance of outperforming the market over the long term.
Disclaimer: This video does not constitute financial advice. We recommend that you speak to a qualified financial planner for advice tailored to your individual circumstances and goals. Financial markets may go up or down, and you are not guaranteed a return on your investment. Past performance is not necessarily a guide to future performance.
