What is a multifactor investment strategy?

A multifactor investment strategy systematically tilts a portfolio toward multiple dimensions of expected return. Peer-reviewed academic research has identified several factors—like value, size, profitability, and investment—that have historically commanded risk premiums. Rather than timing markets or picking individual stocks, multifactor strategies overweight securities with favorable factor characteristics and underweight those without them. The key insight is diversification across risk sources. Different factors perform differently across economic states. By combining exposures to multiple factors, investors can potentially earn higher expected returns while avoiding the concentration risk of betting on a single anomaly. It's a disciplined, rules-based approach grounded in decades of empirical evidence.