# Factor Timing

_Systematic Investing . 2026-07-08 . By Tanmay Kurtkoti. Educational, illustrative, not advice._

A friend forwarded a factor rotation pitch last night. Move into whichever style is working right now, it said. Value, momentum, quality, low volatility, whichever is hot. Then he asked me the obvious question. Which factor should I be in today.

So I pulled ten years of the factor leaderboard and put it in front of him.

Momentum finished first in 2020. The very next year it finished dead last. Value did the exact opposite, last in 2020 and first in 2021. That reversal is not the exception. Across the decade, last year's leading factor repeated as this year's leader only three times in nine hand-offs. The correlation between where a factor ranked one year and where it ranked the next was basically zero. The leaderboard is a rear-view mirror. It tells you where you have been with perfect clarity and where you are going with none.

Which is why the rotation pitch quietly inverts itself. By the time a style has topped the table, you are buying it after the run, funded by selling whatever is about to turn. Chasing the hot factor is the recency trap wearing a quant costume.

Here is the part that actually pays. Own all five factors and let a rebalance do the work, selling the one that ran and buying the one that lagged. Over the same ten years that blend earned about 10.5 percent a year in my illustrative set, with a worst year of minus 1.6, while single factors fell as far as minus 11. It was never first. It was also never last. Slightly ahead of the average factor you might have picked, at two thirds of its volatility, and it needed no forecast at all.

Even Cliff Asness, who built a firm on factors, called factor timing deceptively difficult. Owning the blend is refusing to guess and getting paid for the discipline: