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Invest in multiple single-factor funds with a 7 to 10-year horizon

Timing entry and exit in a single-factor fund is impossible


Sanjay Kumar SinghKarthik Jerome
Factor-based funds, also called smart-beta funds, have done well year-to-date. Momentum-based factor funds have outperformed owing to high momentum in the equity market in recent times. 

The broad-based nature of the rally has helped the equal-weight strategy do well. But before you decide to invest in these funds, understand how they work. 
What is a factor-based fund?

These are rule-based funds. A universe is defined and then a few filters (or criteria) are applied to it. The stocks obtained are ranked in descending order. Those that rank higher are given a higher weight in the factor index.

An index like

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First Published: Oct 17 2023 | 7:46 PM IST

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