Investment factors are historical drivers of long term returns. When constructing portfolios we focus on style factors such as value, size, and low volatility while remaining aware of macroeconomic factors such as interest rates, inflation, and growth cycles. Our low-cost Fig portfolio models are created with several thousand stocks and favor companies with lower price to book, price to earnings and price to free cash flow ratios. We also favor companies smaller in size and less volatile than peers. This total market approach helps us to reduce frequent taxable trading while harnessing long-term return potential.
Academic research has shown:
- Companies inexpensive relative to peers tend to outperform over time. (value factor)
- Companies smaller in size tend to outperform larger companies over time. (size factor)
- Companies of higher quality with greater margin, stronger balance sheets and less volatile earnings tend to outperform lower quality companies over time. (quality factor)
- Companies that have been less volatile than their peers tend to outperform over time. (low volatility factor)