Factors have been employed for decades, but retail investors are only beginning to lift the lid on this investment approach. The world is becoming increasingly more quantified. People are tracking everything from sleep, caloric intake, light exposure, step count, and so on. It is only natural that we start to quantify our investments. Institutional money managers have been using data to guide their investments for decades and it’s about time that retail investors hop on this trend.

Of course, not every professional investor has adopted the data-driven approach. There are still many actively traded funds, but their services are expensive and the majority do not outperform the market. A 2007 study by Andrew Ang found that the primary driver of returns for the active fund in question was simple style factors.

70% of all active returns on the overall Fund can be explained by exposures to systematic factors over the sample

The active manager's underperformance has continued through the last two decades - new 2022 CNBC report finds almost 80% of active fund managers are falling behind the major indexes.