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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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