Factor investments: Study shows long-term success and annual volatility of investment strategies

Factor investments: Study shows long-term success and annual volatility of investment strategies

According to a report by www.private-banking-magazin.de Factor investments are a popular investment strategy that has been proven successful in a recent study. Capital market analyst Sebastian Dörr from HQ Trust analyzed the performance of 12 well-known factor strategies since 1997 and found that 10 of 12 factor indices have outperformed the market-wide S&P 500 since 1997. Particularly noteworthy are strategies that rely on share buybacks, with an average return of 12.5 percent per year, followed by quality strategies with 11.8 percent and dividend aristocrats with 10.7 percent per year. In comparison, the S&P 500 achieved an average return of 9.1 percent per year and therefore did not make it into the top 10 factor strategies.

The study also highlights the volatility of these investment strategies, as in the 27 years examined, 9 different strategies moved to first place, with no strategy repeating this success the following year. Some, like the High Beta strategy, which was at the top most often, even ended up in last place. Interestingly, the three strategies that performed best over the long term - Buyback, Quality and the Dividend Aristocrats - were never in last place.

These results show that factor investing can be a worthwhile strategy in the long term, but investors should not ignore the annual fluctuations and associated risks. It is important to diversify investment portfolios to minimize risk and maximize long-term returns.