An investment strategy to track factor-based indexes could become a trend in the local equity market, according to analysts who attended a recent seminar held by Taiwan Index Plus Corp.
In the seminar, analysts urged the local equity market to launch factor-based investing indexes that will provide relevant factors and deliver "risk adjusted" results.
Such an investment strategy, which weighs select factors such as economic strength, monetary policies and even geopolitical situations, could lead to a better return with fewer risks than the broader market, according to analysts.
Taiwan Index Plus, a wholly owned subsidiary of the Taiwan Stock Exchange, cited a survey conducted at the seminar as saying that 51 percent of the meeting attendees expressed hope that the local main board and the over-the-counter market will compile indexes that are comprised of a myriad of factors, in order to provide more investment options for investors.
The survey showed that 62 percent of the seminar attendees said the Taiwan equity market should provide investors with more exchange traded funds (ETFs), as they expect this would raise indexing investment tools and deliver factor-based adjusted returns.
In addition, 44 percent of the seminar attendees said that Taiwan should issue futures that track indexes and existing ETFs.
In a keynote speech at the seminar, Huang Chao-tang (???), executive vice president of Yuanta Securities Investment Trust Co., said that an index investing strategy is expected to serve as an excellent way for investors, in particular senior citizens in many aging societies in Asia, to make investment decisions.
In the current "mediocre" economy, the index investing methods could become a good solution for investors who want to generate stable profits, Huang said.
According to Huang, the size of mutual fund tracking indexes, a passive investment method, rose more than 500 percent in the last 10 years, but the size of mutual funds, which adopt active investment strategies and generally involve frequent trading and a focus on short-term profit, has been on the decline.
Liao Chung-wen (???), a manager with Fubon Asset Management, said that since Taiwan launched leveraged and inverse ETFs for the first time in 2014, investors have more leeway to map out their investment strategies for higher profits.
A leveraged ETF will allow investors to amplify their returns on an underlying index, while an inverse ETF is designed to perform in the opposite direction of the movement of an index tracked by the ETF.
Source: Focus Taiwan News Channel