WCI #169: Rick Ferri versus Paul Merriman on Factor Investing

The podcast features Rick Ferri and Paul Merriman debating factor investing, particularly the small and value stock effect. They define asset classes and factor investing, distinguishing it from total market investing. Ferri emphasizes that exposure to the market (beta) is the primary driver of returns, while Merriman advocates for tilting towards factors like small-cap value to potentially enhance returns, acknowledging that factor investing has never worked as expected. The discussion explores whether the outperformance of small and value stocks is due to risk or behavioral factors, with Ferri leaning towards risk and Merriman emphasizing behavioral aspects. Both agree that factor tilting requires a long-term perspective, potentially a lifetime commitment.