
Long-run Factor Premium Returns
For most people, a long-term investment approach works best. Recent stock market volatility demonstrates the futility of attempting to time the market. Over time, a handful of key equity factors including Size, Value and Momentum, have risen to prominence as drivers of portfolio returns in excess of returns available from passively tracking the stock market index (see our guide below for a reminder of the terminology). These excess return premiums, or factors, embody specific characteristics and those factors combine to explain past returns in excess of the market return.