Skip to main content

Vanguard factor-based funds

While these funds attempt to take advantage of specific stock characteristics, they're definitely not for the faint of heart.

What are "factor based" funds?

Factor-based funds are a form of active management. They offer the potential to achieve specific risk and return objectives by purposely and explicitly "tilting" portfolios toward certain stock characteristics, like recent momentum, higher quality, or lower stock prices.

But they come with significantly more risk than you'd experience investing in the broader stock market.

Who might invest in factor funds?

Factor funds may be appropriate for you if you're an experienced long-term investor who wants to pursue specific factors but are looking for more transparency than you'd find in a traditional actively managed fund.

While we don't expect any of these funds to serve as your core investment, you may use them to tilt a portion of your portfolio in an attempt to augment its performance.

Factor timing is extremely difficult, and strategies that attempt to do so are ill-advised. So be sure you have the long-term patience needed to stick with a factor-based investment strategy.

Vanguard's approach to factor-based investing

As with all our funds, we take a deliberate approach when developing factor funds, choosing to target only those factors that have undergone exhaustive analysis and that we believe could have long-term benefits for our investors.

These new funds will take a transparent, rules-based approach to offering consistent exposure to specific factors. And of course, all of our factor funds are offered at the low costs you'd expect from us.

After extensive research, we've created funds focused on these 6 factors based on their potential for long-term capital appreciation.

Expand all

Collapse all

Minimum volatility

For investors who want to focus on stocks with lower volatility relative to the broad U.S. stock market.

Value

For investors who want to focus on stocks that have relatively lower share prices relative to their fundamental values.

Momentum

For investors who want to focus on stocks with strong recent performance.

Liquidity

For investors who want to focus on stocks with lower measures of trading liquidity in the hope of accessing the potential premium associated with those stocks.

Quality

For investors who want to focus on stocks with strong fundamentals, which may include higher operational earnings and balance-sheet quality.

Multifactor

For investors who want to focus on stocks that combine relatively strong recent performance, strong fundamentals, and low prices relative to fundamentals.

This is being offered as both an ETF and a mutual fund.

STRIKE THE RIGHT BALANCE BETWEEN RISK & REWARD

Your asset allocation—how you divide your money between stocks and bonds—may be the most important factor in your portfolio's performance.