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Level 10 • FundSage Academy

Advanced Investing

•Updated for FY 2025-26•By FundSageAI Quantitative Research Team

Factor investing, portfolio theory, and the risk-adjusted metrics used to evaluate funds at an advanced level.

What You Will Learn in This Level

Level 10 provides actionable mutual fund frameworks calibrated for Indian retail investors. Mastering these lessons protects your portfolio from common psychological traps, hidden expense drag, and improper asset allocation.

✓Factor Investing Explained: A factor fund is not a plain index fund with a different name — its systematic tilt changes its risk and return pattern.
✓Smart Beta Explained: "Smart" describes a different rule for building the index, not a promise of better returns.
✓Modern Portfolio Theory Explained: Combining assets that don't move together can reduce overall portfolio risk — this is the core insight behind diversification.
✓Correlation in Portfolios: Diversification comes from low correlation, not just from holding more funds or more fund houses.

Lessons in Level 10

1

Factor Investing Explained

Advanced · 5 min read

2

Smart Beta Explained

Advanced · 4 min read

3

Modern Portfolio Theory Explained

Advanced · 5 min read

4

Correlation in Portfolios

Advanced · 4 min read

5

Monte Carlo Simulation Explained

Advanced · 5 min read

6

Sequence of Returns Risk

Advanced · 5 min read

7

Rolling Returns: An Advanced View

Advanced · 4 min read

8

Drawdown Analysis for Portfolio Construction

Advanced · 5 min read

9

Risk-Adjusted Returns Explained

Advanced · 5 min read

Frequently Asked Questions: Advanced Investing

Is factor investing the same as active management?

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No — factor investing is typically rules-based and systematic (similar to indexing), just weighted toward specific characteristics rather than market cap, whereas active management relies on a fund manager's discretionary stock selection.

Can factors underperform the broad market for long periods?

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Yes — historical data shows factors can underperform for years at a stretch before reverting to their long-term historical premium (if any), which is an important expectation to set before investing based on a factor's long-term track record alone.

Do factor funds cost more than plain index funds?

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Generally yes, though typically less than traditional actively managed funds — since factor funds require more complex rules-based rebalancing than a simple market-cap-weighted index, their expense ratios usually sit between plain index funds and active funds.

How does factor investing relate to Smart Beta?

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Smart Beta is essentially the product category built around factor investing — see Smart Beta Explained for how these strategies are packaged and implemented in practice.

Are Smart Beta funds actively managed?

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No — they remain rules-based and systematic like a plain index fund; the difference is in the weighting/selection methodology, not in discretionary fund manager decisions.