Skip navigation

Three Equity Factors


Stocks have higher expected returns than fixed incomes.


Small company stocks have higher expected returns than large company stocks.


Lower-priced "value" stocks have higher expected returns than higher-priced "growth" stocks.


Risk Means Opportunity

We stand by the philosophy that investors are rewarded in proportion to the risk they take. Framing decisions around compensated risk factors in the equity and bond markets connects investors to the forces that create opportunities to build wealth over time. While returns come from risk, not all risk is created equal. We believe that everything we have learned about expected returns in the equity markets can be summarized in three dimensions. The first dimension is that stocks are riskier than bonds and have greater expected returns. Relative performance among stocks is largely driven by the two other dimensions: small/large and value/growth. Many economists believe that small cap and value stocks outperform because the market rationally discounts their prices to reflect underlying risk. The lower prices give investors greater upside as compensation for bearing this risk.


One of Global Trust’s core beliefs is that markets are efficient and work. Traditionally, managers strive to “beat” the market by seeking pricing mistakes and attempting to predict the future. Too often, this strategy proves costly and futile. At Global Trust, we see capital markets as an ally, not an adversary. Rather than speculating or seeking out “mistaken” prices, we investigate the ways that markets compensate investors. Markets throughout the world have a history of rewarding investors for the risk they take and capital they supply to launch and expand companies. Companies compete with one another for investment capital, and investors compete with one another to find the most attractive returns. This competition quickly drives prices to “fair value,” ensuring that no investor can expect higher returns without bearing higher risk. Since information on public companies is widely disseminated, gaining an edge on other investors is difficult. Does this mean that all markets are perfectly efficient and all companies are correctly priced? No, it does not, but it does indicate that markets and company prices are a function of all the public information available at any given time.

The Fixed Income Factors

We approach fixed income primarily as a strategy to maximize overall portfolio performance. Shorter-term, high-quality debt instruments tend to have less risk. In other words, longer-term instruments are risker than shorter-term ones, and instruments of lower credit quality are riskier than those with higher credit quality. Our lower-risk bond strategies help temper total portfolio volatility to take more risk in equities, where expected returns are greater.

Deliberate & Diversified

We believe that diversification is essential to a solid investment strategy because it washes away the random fortunes of individual stocks and positions portfolios to capture the returns of broad economic forces. We diversify not only in the amount of securities held but also in the range of capital market strategies we explore and develop. In this way, we focus on the factors that drive investment returns and reduce excess and undesirable risk. Specifically, we diversify your portfolio based on your risk/reward ratio and your objectives.