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Momentum vs Value vs Quality: Factor Investing Explained
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Factors explain stock returns
- Decades of research identify factors as measurable characteristics
- Factors help explain returns across stocks
- First factor is momentum
- Momentum stocks continue performing well short to medium term
- Second factor is value
- Value stocks trade below fundamental worth
- Value stocks offer higher long-term returns
- Third factor is quality
- Quality companies have strong profitability and low debt
- Factor investing uses rules and testing
- Factors reduce concentration risk
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