How does Factor Investing combine aspects of both active and passive investing? Option: "It uses algorithms to automatically replicate the trades of successful active investors", "It relies solely on index funds like passive investing, but actively manages the chosen index", "It mirrors the portfolio of a chosen actively managed fund, but with lower fees", "It involves selecting securities based on factors like active investing, but with less frequent trading"

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How does Factor Investing combine aspects of both active and passive investing?

"It uses algorithms to automatically replicate the trades of successful active investors"

"It relies solely on index funds like passive investing, but actively manages the chosen index"

"It mirrors the portfolio of a chosen actively managed fund, but with lower fees"

"It involves selecting securities based on factors like active investing, but with less frequent trading"

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What is a key advantage of Factor Investing compared to Active Investing?

"It eliminates the need for any market analysis"

"It relies on evidence-based metrics rather than speculation"

"It is entirely automated and requires no investor input"

"It guarantees higher returns with lower risk"

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What is the primary focus of Factor Investing?

"Identifying stocks with high dividend yields"

"Selecting investments based on specific characteristics that drive returns"

"Investing in companies with strong momentum"

"Analyzing macroeconomic trends to predict market movements"

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What is a key consideration for investors looking to mitigate the cyclical nature of factor performance?

Timing the market based on economic indicators

Focusing on factors with consistent historical outperformance

Selecting funds with the lowest expense ratios

Investing in a diverse range of factors

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What distinguishes smart-beta funds from traditional investment approaches?

They exclusively focus on short-term market trends.

They prioritize high-risk, high-reward investment opportunities.

They combine elements of active and passive management strategies.

They solely rely on market capitalization for stock selection.

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Which of the following is NOT a commonly recognized factor in factor investing?

Momentum

Value

Liquidity

Quality