| Investment Dimensions
Dimensions point to systematic differences in expected returns on specific investments. Your portfolio can be structured around these dimensions which are sensible, backed by data, and cost-effective.
Equities:
The Market Dimension – stocks have a higher expected return than bonds.
Company Size Dimension – smaller companies carry higher return potential than larger ones.
Dimension of Relative Price – value stocks (favorable price to book ratio) offer a premium over growth stocks.
The Profitability Dimension – highly profitable companies provide premium over low profitability companies.
Fixed Income/Bonds:
In fixed income, two dimensions largely drive relative performance: term and credit. Longer-term bonds are more sensitive to changes in interest rates. Bonds with lower credit quality have a greater risk of default.
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