Broadly speaking there are three different types of fund you can invest in — active
funds, passive funds and funds that give you exposure to specific factors, also known as
factor funds. Now the evidence is pretty clear that paying for actively managed funds are not worth it.
Some investors choose instead to invest entirely in low cost index funds in other words
that track the whole market. But, for those who are willing to accept more volatility, there is a case for trying to beat the market using factor funds. Here is Gerard O’Reilly from Dimensional Fund Advisors.