Everyone wants to know the magic formula to make a big stash of money, quickly. It is why “The secrets of Soros” and “How to invest like Buffett” are regular headline fodder. In a more serious, but similar, vein investment firm AQR also crunched the numbers through the prism of “factors”. Here I look at what is meant by “factors” and what can be learnt, of practical value to your success, from the AQR research.
You can’t do better than buying an index tracker (a passive fund). That was the conclusion of the efficient market theory and capital asset pricing model (CAPM) fifty-plus years ago, and it has dominated the thinking of a large part of the investment industry ever since.