New Delhi, May 31 -- An investment approach that chooses securities based on specific characteristics that determine risk and return is known as factor investing. It aims to boost returns, manage risks and enhance diversification by strategically focusing on particular factors.

The two major types of factors that influence investments are macroeconomic factors and style factors.

Macroeconomic factors include a broad range of risks across various asset classes. Some common macroeconomic factors are inflation, GDP, and the unemployment rate.

Style factors focus on returns and risks associated with specific asset classes. These factors include value, growth, low volatility, quality and momentum.

1. Value: The value factor is based on the...