Factor investing strategies don't completely abandon large-cap stocks or companies with high valuations. However, weighting in these portfolios is guided by factor scores, meaning stocks that grade the best tend to be the largest holdings. This can be contrasted with market-weighted indexes, in which the largest companies are the biggest holdings. This means that factor-based allocations are more skewed toward smaller companies than you would expect in most passive strategies. How to implement a factor investing strategyIf you're managing a large enough portfolio, you can probably just run a stock screen for a handful of factors, and then allocate based on the results of those screens.

Source: Daily Sun February 06, 2021 14:15 UTC