401(k) Specialist Issue 2 - 2019 - 43

Q: You're talking about sequence
of return risk?
A: Yes, sequencing the factor exposure.
When you're younger, much more allocation
to size and value. As you age, more
defensive factors like low volatility and
quality. And then when you're in retirement,
other factors like dividend-yield that
provide a level of income but a very potent
source of total return, as well.
Along with that, we don't only think of
the equity side of the equation. Increasingly,
we are thinking about the fixed income
side of the equation as well. We find similar
outcomes that especially value higher credit
data when you're younger, which makes a
lot of sense, and then you lessen the credit
data as you age.
We have a very similar kind of idea
around factors. We employ quality and value,
in particular, within our credit strategy.
But from a target perspective the whole
idea would be the same thing, which is the
more time diversification you have at your
disposal, the more you're able to utilize
factors in both equity and fixed income.
Q: Why do you hate modern portfolio
theory?
A: [Laughing] Well, I mean, your traditional
modern portfolio theory says that if
you want more return, you have to take
more risk.
That has become the mantra of finance
101. But that's not necessarily true. You
can find many sources of returns that
come with correspondingly less risk,
meaning maybe higher return but you're
taking correspondingly less risk to access
that. That is really the beauty of factor
investing. When I invest in value stocks,
I may be taking more risk than just
investing in the S&P 500, but I'm getting
paid more to take that risk, and disproportionately
more. That's truly the beauty
of factor investing. All factors-size, value
and especially defensive factors like low
volatility, dividend yield, quality-these
have really been shown to deliver higher
returns per unit of risk.
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ISSUE 2 2019 | 401kSpecialist.com
43

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401(k) Specialist Issue 2 - 2019

Table of Contents for the Digital Edition of 401(k) Specialist Issue 2 - 2019

Table of Contents
401(k) Specialist Issue 2 - 2019 - Cover1
401(k) Specialist Issue 2 - 2019 - Table of Contents
401(k) Specialist Issue 2 - 2019 - 1
401(k) Specialist Issue 2 - 2019 - 2
401(k) Specialist Issue 2 - 2019 - 3
401(k) Specialist Issue 2 - 2019 - 4
401(k) Specialist Issue 2 - 2019 - 5
401(k) Specialist Issue 2 - 2019 - 6
401(k) Specialist Issue 2 - 2019 - 7
401(k) Specialist Issue 2 - 2019 - 8
401(k) Specialist Issue 2 - 2019 - 9
401(k) Specialist Issue 2 - 2019 - 10
401(k) Specialist Issue 2 - 2019 - 11
401(k) Specialist Issue 2 - 2019 - 12
401(k) Specialist Issue 2 - 2019 - 13
401(k) Specialist Issue 2 - 2019 - 14
401(k) Specialist Issue 2 - 2019 - 15
401(k) Specialist Issue 2 - 2019 - 16
401(k) Specialist Issue 2 - 2019 - 17
401(k) Specialist Issue 2 - 2019 - 18
401(k) Specialist Issue 2 - 2019 - 19
401(k) Specialist Issue 2 - 2019 - 20
401(k) Specialist Issue 2 - 2019 - 21
401(k) Specialist Issue 2 - 2019 - 22
401(k) Specialist Issue 2 - 2019 - 23
401(k) Specialist Issue 2 - 2019 - 24
401(k) Specialist Issue 2 - 2019 - 25
401(k) Specialist Issue 2 - 2019 - 26
401(k) Specialist Issue 2 - 2019 - 27
401(k) Specialist Issue 2 - 2019 - 28
401(k) Specialist Issue 2 - 2019 - 29
401(k) Specialist Issue 2 - 2019 - 30
401(k) Specialist Issue 2 - 2019 - 31
401(k) Specialist Issue 2 - 2019 - 32
401(k) Specialist Issue 2 - 2019 - 33
401(k) Specialist Issue 2 - 2019 - 34
401(k) Specialist Issue 2 - 2019 - 35
401(k) Specialist Issue 2 - 2019 - 36
401(k) Specialist Issue 2 - 2019 - 37
401(k) Specialist Issue 2 - 2019 - 38
401(k) Specialist Issue 2 - 2019 - 39
401(k) Specialist Issue 2 - 2019 - 40
401(k) Specialist Issue 2 - 2019 - 41
401(k) Specialist Issue 2 - 2019 - 42
401(k) Specialist Issue 2 - 2019 - 43
401(k) Specialist Issue 2 - 2019 - 44
401(k) Specialist Issue 2 - 2019 - Cover3
401(k) Specialist Issue 2 - 2019 - Cover4
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