Factor investing offers a middle ground between active stock-picking and passive index tracking.

Factor investing offers a middle ground between active stock-picking and passive index tracking. Rather than chasing individual stocks or blindly following market-cap indices, factor investing targets specific traits like value, momentum, quality, and low volatility. These factors perform differently across market cycles, meaning no single style wins every year. However, historical data shows factor indices have delivered annualized returns of fourteen to nineteen percent over the last decade, outperforming Nifty 50 and Nifty 500 returns of around twelve to thirteen percent. India's factor fund assets under management surged to over fifty thousand crore as of April 2026, up from less than one thousand crore five years ago. Diversifying across different factor styles protects investors from style rotation while capturing long-term market outperformance.