While single-factor strategies that target stocks with low valuations, strong momentum, high profitability, and low volatility have each been successful over the long term, they all experience extended stretches of underperformance. But because these factor strategies tend to perform well at different times, investors can reduce risk without sacrificing return by diversifying across them.
Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC) is an attractive diversified multifactor strategy that provides modest tilts toward stocks with low valuations, strong momentum, high profitability, and low volatility. While the fund's factor tilts are small, it has a low expense ratio to match, which gives it a reasonable chance to beat the S&P 500 over the long term. The fund earns a Morningstar Analyst Rating of Bronze.
Alex Bryan, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.