Last Updated on 16 October 2020 by F.R.Costa

Factors are replacing asset classes in portfolio construction. This book is a rigorous well-written guide to factor investing. It helps investor build more efficient portfolios.

The conventional view groups assets into stocks, bonds, commodities, interest rates, money market, high yield, international equities, and so on. But, unfortunately, we have seen that, under stress, all these asset classes are highly correlated. That means that, under stress, there’s no hidden place in the market offering diversification to a portfolio.

Asset classes are a poor classification for risk management purposes. What we really need is to slash assets into their raw ingredients in a way there’s nothing in common between them.

It’s like you going into a supermarket and, instead of looking for meat, beverages, and grains; you look for protein, carbohydrates, and lipids.

Academics and practitioners have been looking for factors from long ago. Hundreds of different factors have been studied but just a few stand out from the crowd due to their persistence and resilience. Those include: market beta, size, value, quality, profitability, momentum, term and carry.

In Your Complete Guide to factor-Based Investing: The Way Smart Money Invests Today, Andrew L. Berkin and Larry E. Swedroe look into the world of factor investing, rigorously explaining what factor investing is and which are the key factors to look for. The book is easy to read, but requires some good knowledge about investment in general. It’s and ideal reading for someone willing to know more about the topic, looking for ways of diversifying a portfolio, or looking for a detailed revision of the evidence on factor investing. I vigorously recommend it.

Your Complete Guide to Factor-Investing was published in 2016. Here are some details about the digital version of the book (from Amazon.com):

  • File Size : 7248 KB
  • Publication Date : December 5, 2016
  • Word Wise : Enabled
  • Print Length : 298 pages
  • Publisher : BAM ALLIANCE Press; 1st Edition (December 5, 2016)
  • ASIN : B01N7FCW2D
  • Text-to-Speech : Not enabled
  • Enhanced Typesetting : Enabled
  • Language : English
  • X-Ray : Not Enabled

About F.R.Costa

Filipe has more than 20 years experience with financial markets. He holds a degree in Economics with a specialisation in Finance and he's currently finishing a PhD in Finance. He used to work as financial consultant and research associate but then decided to return to academia five years ago. Since that, he has been an Invited Lecturer, teaching courses on Investments, Financial Markets, and Monetary Economics. He is also a regular contributor writer at The Master Investor Magazine.

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