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Investing in specific factors may help investors reach their goals by helping to reduce portfolio volatility or improve returns. Factors are the persistent and well-documented asset characteristics that have historically driven investment risk and return. A common way to access factors is through rules-based ETFs.

Watch time: 5 minutes 12 seconds

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We highlight five factors – value, quality, momentum, size, and minimum volatility – that have shown to be resilient across time, markets, asset classes, and have a strong economic rationale.¹

Minimum Volatility

Minimum volatility investing seeks to build a portfolio of stocks that exhibits less variability than the broad market. It aims to provide investors with a smoother ride within equity allocations by creating a portfolio that exhibits less swings — up or down — than the market.

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Product spotlight:

• iShares MSCI Min Vol Canada Index ETF
• iShares MSCI Min Vol USA Index ETF
• iShares MSCI Min Vol EAFE Index ETF
• iShares MSCI Min Vol Emerging Markets Index ETF
• iShares MSCI Min Vol Global Index ETF

Quality

Quality investing strategies look for stocks that have higher quality earnings. That means that we’re looking for stocks that are profitable, have low leverage, and demonstrate consistent earnings over time. Quality has traditionally outperformed the broad market during periods of high volatility.²

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Product spotlight:

• iShares MSCI USA Quality Factor Index ETF

Size

The size factor focuses on smaller, more nimble companies. Smaller companies may be more nimble, and can potentially more easily adjust and identify new investment opportunities in the marketplace. Smaller size companies have tended to perform well in the early stages of an economic upswing.³

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Product spotlight:

• iShares S&P/TSX SmallCap Index ETF
• iShares S&P U.S. Small-Cap Index ETF

Momentum

Momentum investing is concerned with stocks that are trending in a particular direction. Sometimes investors are irrationally exuberant or incomprehensibly dour. The strategy tends to work best in trending markets.⁴

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Product spotlight:

• iShares MSCI USA Momentum Factor Index ETF

Value

Select stocks that are lower cost relative to their peers after controlling for fundamentals. Cheapness does not necessarily stand for upside potential –sometimes a stock or even a sector remains cheap for a reason. Value has tended to perform well in periods of growth or risk-on environments.⁵

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Product spotlight:

• iShares MSCI USA Value Factor Index ETF

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