TOL - 11th May, 2024
3 key factors every investor can use to their advantage
BlackRock Australia's Tamara Haban-Beer Stats explains how you can use factor investing and the three factors BlackRock focuses on.
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The term ‘factor investing’ might sound like the latest investment trend, but it’s been around for decades. In fact, it’s typically been the domain of active investment managers and it’s not as complicated as it might sound.
“Factor investing is really around seeking to identify particular characteristics within a universe of securities that exhibit certain qualities,” says Tamara Haban-Beer Stats, Director and ETF/Index Investments Specialist for BlackRock Australia.
Think a fund of investments just identified on the basis of quality, or investments that only meet certain value criteria. Or alternatively, an investment purely made up of companies that are currently experiencing strong price momentum.
You choose a characteristic, and your investments are filtered based on this. A comparison is what happens when you head to a travel site to book a holiday.
“You can choose anything online from hotel star rating, to proximity to the beach or proximity to the city, reviews, there are all sorts of characteristics you can filter and make your choice on. That’s actually quite similar to factor investing. It’s really around identifying characteristics that filter out a specific group of stocks,” says Haban-Beer Stats.
BlackRock focuses on three factors:
- Quality: exposure to companies with strong balance sheets as measured by profitability metrics, leverage ratios and earnings stability.
- Value: identifying companies that are undervalued compared to their peer group using metrics such as price-to-book, price-to-earnings and enterprise-value-to-cashflows.
- Momentum: companies that are experiencing strong price momentum considering price movements over a six- and 12-month period.
In this Fund in Focus, Haban-Beer Stats discusses factor investing and how investors can use it in a portfolio. She also shares more detail on the three factors that BlackRock have selected as their focus.
This interview was filmed on Tuesday 16 April 2024.
Timecodes
- 0:00 - Intro
- 0:21 - What is factor investing?
- 1:57 - BlackRock's three factors
- 3:08 - The case for factor investing
- 3:33 - How factor investing complements sector investing
- 4:17 - Reducing concentration risk
- 4:49 - How investors can incorporate factor investing into a portfolio
- 5:18 - One thing investors should keep in mind when using factor investing
Learn more about iShares Factor ETFs here.
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Sara is a Content Editor at Livewire Markets. She is a passionate writer and reader with more than a decade of experience specific to finance and investments. Sara's background has included working at ETF Securities, BT Financial Group and Macquarie Group. She also holds a degree in psychology which drives a continued fascination with how human behaviour drives and is driven by investments and market activity.
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This material has been created with the co-operation of BlackRock Investment Management (Australia) Limited (BIMAL) ABN 13 006 165 975, AFSL 230 523 on 16 April 2024. Comments made by BIMAL employees here represent BIMAL’s views only. This material provides general advice only and does not take into account your individual objectives, financial situation, needs or circumstances. Before making any investment decision, you should obtain financial advice tailored to you having regard to your individual objectives, financial situation, needs and circumstances. Refer to BIMAL’s Financial Services Guide on its website for more information. This material is not a financial product recommendation or an offer or solicitation with respect to the purchase or sale of any financial product in any jurisdiction.
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Sara is a Content Editor at Livewire Markets. She is a passionate writer and reader with more than a decade of experience specific to finance and investments. Sara's background has included working at ETF Securities, BT Financial Group and...
Sara is a Content Editor at Livewire Markets. She is a passionate writer and reader with more than a decade of experience specific to finance and investments. Sara's background has included working at ETF Securities, BT Financial Group and...
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