When it comes to investing, understanding what drives stock performance can be a game-changer. Enter factor-based investing—an approach that uses specific market factors to guide investment decisions. Traditionally, this strategy was reserved for institutional investors with access to complex models and a team of analysts. But with the rise of automated investment platforms, it’s now more accessible for individual investors. Let’s break down what factor-based investing is, why market factors matter, and how Surmount’s automation can help you take advantage of this approach.

What Are Market Factors and Why Do They Matter?

Market factors are characteristics that can help explain why certain stocks or assets behave the way they do. Think of them as the underlying traits that influence market movements—characteristics like value, momentum, size, quality, and volatility. Each factor represents a different dimension of risk and return that investors may consider when building their portfolios.

Factor-based investing uses these characteristics to build diversified investment models that seek to align with specific market conditions. For example:

• Value factors look for stocks that may be priced lower than their intrinsic value.

• Momentum factors focus on stocks that have shown a recent trend of strong performance.

• Size factors consider the market capitalization of companies, often focusing on smaller firms that might offer growth potential.

Understanding these factors allows investors to construct portfolios that are tailored to their risk tolerance and financial goals. This approach can add an extra layer of sophistication to a traditional portfolio by focusing on the fundamental drivers behind market behavior.

How Surmount’s Automated Strategies Leverage Factor-Based Investing

Automation has revolutionized the world of investing, making complex strategies easier to implement. At Surmount, our platform integrates automated factor strategies to help streamline your investment process. Here’s how it works:

• Data-Driven Adjustments: Our algorithms analyze real-time market data, using factor-based models to identify potential opportunities across different conditions. This data-driven approach helps ensure your portfolio remains aligned with your investment preferences, whether you’re interested in low-volatility stocks or those with strong momentum.

• Customizable Options: Surmount’s platform allows you to automate strategies that fit your goals, making it simple to align your portfolio with specific market factors. Whether you prefer to focus on value stocks or aim to include high-quality companies, you can tailor your strategy to suit your needs.

• Hands-Off Management: One of the key benefits of automation is the ability to let your investment strategies work without constant manual intervention. Our automated approach helps manage your portfolio through evolving market conditions, allowing you to stay focused on your long-term objectives.

By leveraging factor-based investing through an automated platform like Surmount, you can access a sophisticated strategy that adjusts to market trends—helping to make your investment process more efficient.

Common Factors that Drive Investment Returns

Knowing the key factors that influence returns can help you better understand how factor-based investing works. Here are a few of the most influential factors that our platform considers:

• Value: This factor identifies stocks that appear undervalued based on metrics like price-to-earnings or price-to-book ratios. The idea is that stocks trading below their intrinsic value may have the potential for appreciation as their prices align with their fundamentals.

• Momentum: Momentum strategies focus on stocks that have shown strong recent performance, based on the notion that upward trends can sometimes continue for a period. This factor can be appealing during periods when certain stocks or sectors experience sustained growth.

• Size: This factor focuses on companies with smaller market capitalizations, often referred to as small-cap stocks. While these stocks can be more volatile, they are sometimes seen as offering greater growth potential than large-cap companies.

• Quality: This factor emphasizes financially stable companies with strong earnings, robust balance sheets, and high profitability. Quality stocks can add resilience to a portfolio, particularly during periods of market turbulence.

• Volatility: Low-volatility strategies aim to include stocks with lower price swings, offering a smoother investment experience. While they may not capture every market surge, they can help mitigate risks during uncertain times.

By using automated systems to manage these factors, investors can maintain a diversified portfolio that seeks to balance potential risks and rewards. This approach makes it easier to adapt to changing market conditions without needing constant adjustments.

Why Factor-Based Investing + Automation Is a Smart Approach

Combining factor-based investing with automation can simplify your investment strategy. Here’s why this approach can be effective for investors:

• Efficiency: Automated platforms can execute complex strategies based on predefined rules, reducing the chance for manual errors. This means your investments are managed consistently, following data-driven models without the need for daily oversight.

• Timeliness: Automation helps to keep your portfolio aligned with market conditions, making adjustments as new data becomes available. This can be especially helpful when market trends shift quickly.

• Access to Proven Strategies: Surmount’s platform allows you to use models that have been developed based on extensive research into market factors. By integrating these strategies, you can apply sophisticated investment techniques that were once the domain of professional managers.

Through Surmount’s automated platform, investors gain access to tools that aim to optimize portfolios by focusing on fundamental drivers of market behavior. This helps to ensure that your investment approach remains in tune with broader market dynamics while you stay focused on long-term growth.

Conclusion

Factor-based investing offers a structured way to align your investments with key market characteristics, making it easier to pursue your financial objectives. By using automated platforms like Surmount, you can simplify the process of implementing these strategies, allowing you to focus on what matters most—achieving your financial goals. Explore how Surmount can support a smarter investment strategy by integrating factor-based models into your portfolio.


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Disclaimer: The information presented is for educational purposes only and does not constitute investment advice. All investments involve risk and may lose value. It is important to conduct your own research and consult with a licensed financial advisor before making any investment decisions. Past performance does not guarantee future results.