As football season kicks off, millions of fans are finalizing their fantasy drafts. Drafting a strong fantasy team takes foresight, balance, and an eye for value. Interestingly, those same principles can also apply when you’re thinking about investing.

At Mirus Financial Partners, we believe it’s helpful to look at your portfolio the same way you’d look at your fantasy roster: with the right mix of “players” that complement one another. This analogy isn’t about predicting results but about illustrating how different approaches can work together.

What Is Factor Investing?

Factor investing is an investment approach that groups stocks by characteristics, called “factors”, that have historically influenced returns. While there’s no guarantee they’ll work the same way in the future, research shows these factors can be useful tools when building diversified portfolios.

Here are five of the most studied factors:

• Value. Companies trading at prices that may be attractive compared to fundamentals.
• Quality. Firms with strong profitability and efficient operations.
• Momentum. Stocks showing sustained trends in performance.
• Small Size . Smaller companies with room for potential growth.
• Low Volatility. Companies that historically have shown steadier performance relative to the broader market.

Fantasy Football as an Example

Just as investors may combine different factors for diversification, fantasy football players often build balanced rosters. Here are some parallels from the 2024 fantasy season that illustrate the potential benefits of factor investing:

• Value: Terry McLaurin, WR, Washington Commanders
  Drafted later than many other wideouts, McLaurin finished the season among the top performers. In the same way, value stocks can sometimes provide opportunities when expectations are low.
• Quality: Saquon Barkley, RB, Philadelphia Eagles
  Barkley consistently delivered high production, showing why quality matters. In investing, companies with strong fundamentals may provide stability in shifting markets.
• Momentum: De’Von Achane, RB, Miami Dolphins
  Achane’s performance rose and fell with his quarterback’s health—illustrating how momentum can be powerful but also volatile. Similarly, momentum stocks can be strong in certain conditions but are not always consistent.
• Small Size: Ladd McConkey, WR, Los Angeles Chargers
  A rookie who quickly proved himself, McConkey is an example of how new or smaller players can grow quickly. Smaller companies in investing may offer similar growth potential, though often with higher risk.
• Low Volatility: Aaron Jones, RB, Minnesota Vikings
  Jones provided steady production without extreme highs or lows. Low-volatility investments may play a similar role, helping to smooth out portfolio performance.

Why Diversification Matters

Fantasy managers know the risks of relying too heavily on one type of player. Injuries, bye weeks, or matchups can quickly derail a season. Investors face similar challenges in the market. Diversification across multiple factors does not eliminate risk, but it may help reduce the impact of downturns and provide opportunities across different environments.

How Factors Have Performed Over Time

One of the reasons factor investing has received so much attention is that these characteristics have shown distinct patterns of performance for decades. While no strategy works in every situation, history suggests that certain factors, like value, quality, and low volatility, have played meaningful roles in shaping long-term results.

Warren Buffett once noted that through wars, recessions, inflation shocks, and political turmoil, the U.S. stock market continued to grow over the 20th century. His approach often emphasized investing in great companies (quality), at fair prices (value), while seeking to limit unnecessary risk (low volatility). Those ideas align closely with the principles behind factor investing.

It’s important to remember, however, that no single factor has worked in all environments. Markets go through cycles, just as football teams face different match ups, weather conditions, and game plans. Sometimes smaller companies have the edge, other times steady, low-volatility stocks may be more resilient. This is why diversification across asset classes, sectors, and factors is such a critical part of portfolio construction.

From the Field to Your Finances

While fantasy football is just a game, your financial future is real. The lesson here is not that investments are like football players, but that diversification, combining different strengths, may help you build a portfolio better suited to your personal goals.

At Mirus Financial Partners, our role is to help clients align their portfolios with their individual objectives and comfort with risk. Just as no two fantasy teams are the same, no two financial strategies should be. Contact Mirus today to explore your financial planning options.

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The information provided here is for educational purposes only and is not intended as specific investment advice. Investing involves risk, including the potential loss of principal. Past performance does not guarantee future results. The fantasy football examples are used strictly as analogies and are not intended to suggest or predict investment outcomes. Diversification and factor investing strategies do not ensure a profit or protect against loss in declining markets. Always consider your individual circumstances and consult with a qualified financial professional before making investment decisions.

This article references fantasy football strictly as an analogy to illustrate investment concepts. It is provided for educational purposes only and should not be construed as a promotion or endorsement of gambling. While many fantasy football leagues are organized for entertainment, some may involve wagering. Gambling on fantasy football or other sporting events may be illegal in certain jurisdictions. Individuals are responsible for understanding and complying with all applicable federal, state, and local laws.