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Blackrock finanical literacy
What is factor investing?
Factor investing is an investment approach that involves targeting specific drivers of return across asset classes. Investing in factors can help improve portfolio outcomes, reduce volatility and enhance diversification.
Already familiar with factor investing and ready to dive in?
Factors are broad, persistent drivers of return that research has proven to be historically enduring.
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Factors are economically intuitive
Individual factors tend to outperform at different parts of the economic cycle.
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Factors are diversifying
Factors offer differentiated returns and diversification benefits, with low correlations between different factors.
Introduction to factors
Factors are the foundation of investing—broad, persistent drivers of returns across asset classes. Understand how factors work to better capture the potential for excess return and reduced risk, just as investors have done for decades.
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Text, Economic growth, Inflation, Rates, Credit, Liquidity, Emerging markets
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Text, Minimum volatility, Quality, Size, Momentum, Value
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Text, BlackRock, Aladdin by BlackRock, iShares by BlackRock www dot iShares dot com
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Carefully consider the Fund's investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the fund's prospectuses or, if available, the summary prospectuses, which may be obtained by visiting www dot iShares dot com or www.blackrock.com. Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal. Past performance does not guarantee future results. There can be no assurance that performance will be enhanced or risk will be reduced for funds that seek to provide exposure to certain quantitative investment characteristics ("factors"). Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. In such circumstances, a fund may seek to maintain exposure to the targeted investment factors and not adjust to target different factors, which could results in losses. The iShares Minimum Volatility Funds may experience more than minimum volatility as there is no guarantee that the underlying index's strategy of seeking to lower volatility will be successful. Diversification and asset allocation may not protect against market risk or loss of principle. This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change. The information included in this material has been taken from trade and other sources considered to be reliable. We do not represent that this information is accurate and complete, and it should not be relied upon as such. Any opinions expressed in this material reflect our analysis at this date and are subject to change. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, but are not guaranteed as to accuracy. The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “Black Rock.”) Copyright 2020 BlackRock. Aladdin, iShares and BlackRock are registered trademarks of BlackRock. All other marks are the property of their respective owners.
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Text, Factor investing
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Text, What are factors?
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Text, Economic growth, Inflation, Rates, Credit, Liquidity, Emerging markets
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Text, Minimum volatility, Quality, Size, Momentum, Value
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00:01:43.210 --> 00:01:43.210
A horizontal line indicates lower risk on the far left, and higher risk on the far right. A Minimum volatility icon moves to the left. A Momentum icon moves to the right.
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00:02:15.227 --> 00:02:15.227
Three icons hang from a mobile. A shark fin icon with text Additional Risk. A brick wall icon with text Structural Impediments. And a heart icon with investor behaviour.
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00:02:24.745 --> 00:02:25.150
A shark fin moves through water.
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00:02:32.860 --> 00:02:32.860
A close up view of a brick wall.
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00:02:47.019 --> 00:02:48.090
A heart icon flips to show different icons.
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00:03:56.490 --> 00:03:56.850
Various icons line up. A piggy bank. Family. House. Graduation Cap. And sailboat.
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Text, BlackRock, Aladdin by BlackRock, iShares by BlackRock www dot iShares dot com
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00:04:27.441 --> 00:04:32.000
Carefully consider the Fund's investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the fund's prospectuses or, if available, the summary prospectuses, which may be obtained by visiting www dot iShares dot com or www.blackrock.com. Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal. Past performance does not guarantee future results. There can be no assurance that performance will be enhanced or risk will be reduced for funds that seek to provide exposure to certain quantitative investment characteristics ("factors"). Exposure to such investment factors may detract from performance in some market environments, perhaps for extended periods. In such circumstances, a fund may seek to maintain exposure to the targeted investment factors and not adjust to target different factors, which could results in losses. The iShares Minimum Volatility Funds may experience more than minimum volatility as there is no guarantee that the underlying index's strategy of seeking to lower volatility will be successful. Diversification and asset allocation may not protect against market risk or loss of principle. This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change. The information included in this material has been taken from trade and other sources considered to be reliable. We do not represent that this information is accurate and complete, and it should not be relied upon as such. Any opinions expressed in this material reflect our analysis at this date and are subject to change. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, but are not guaranteed as to accuracy. The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “Black Rock.”) Copyright 2020 BlackRock. Aladdin, iShares and BlackRock are registered trademarks of BlackRock. All other marks are the property of their respective owners.
Types of factors
There are two main types of factors that have driven returns: macro economic factors, which capture broad risks across asset classes; and style factors, which help to explain returns and risk within asset classes.
Macroeconomic factors capture broad risks that exist across asset classes.
Style factors explain risks and returns within asset classes.
Why choose BlackRock for factor investing?
BlackRock has been at the forefront of factor-based investing for decades and continues to innovate new strategies to help address clients’ investment challenges.
BlackRock offers a variety of ways to implement the time-tested principles of factor investing. These range from Factor ETFs to multi-factor strategies.
You can also tap into BlackRock's deep experience with investment factors and browse our tools designed for investors seeking to access these drivers of returns via our solutions page.
Institutional investors and active managers have been using factors to manage portfolios for decades. Today, data and technology have democratized factor investing to give all investors access to these historically persistent drivers of return.
Smart beta is one subset of factor investing. Factor investing harnesses the power of broad and persistent drivers of return. Factor investing can refer to macro factors (which affect returns across asset classes) as well as style factors (which affect returns within asset classes) and can be implemented with or without leverage. Smart beta strategies generally refer to style factors within a single asset class, implemented without leverage, most commonly in style factor strategies that are long only and index based, most commonly in an ETF.
When it comes to factor-based strategies, investors have a lot of options. Each strategy is constructed in a unique way and may have different risks. It’s important that investors understand underlying exposures in the context of the outcome you wish to achieve. Investors who choose long-short factor strategies will add risks associated with leverage.
One of the most pervasive myths around factor investing is that it must be used instead of indexed or active investments. Factor-based strategies, including Factor ETFs, can be used both to replace and to complement traditional index or active investments in the portfolio.
As with any investment, there's no guarantee of performance. Individual factors have tended to perform well at different parts of the economic cycle, and may be less correlated with equity market moves. Be aware of this aspect of factor investing as you investigate whether any particular strategy makes sense with your investment goals. A multi-factor investment is diversified across factors and may help to reduce the effect of this cyclicality.
