In cricket, the team's overall composition frequently matters more than any one star player. And just like different players in the cricket team tend to have different phases of performance, individual factors can undergo prolonged underperformance with impatient investors running out of patience before reping their benefits. Just as a team combines the individual strengths of its players, a multi-factor strategy has the potential to overcome the cyclicality of the factors combined.
Multi-factor funds use two or more criteria during the investment process. Although there is no “right” way to determine which and how many factors to include in a strategy, factor investing benefits from diversity in every way. A multi-factor strategy can offer diversification and improve the consistency of the financial journey.