Explain Factor Investing to Me Like I Am Starting Out

Value, momentum, quality, small-cap: the words turn up in every portfolio review and nobody stops to define them. This explains factor investing for a beginner: what a factor is and why it might pay a persistent premium, the five most evidence-backed ones in plain English, how a factor tilt changes a plain index portfolio, and the risks of chasing them. For investors ready to go one step past the index fund.

I keep hearing terms like value, momentum, quality, and small-cap premium when reading about portfolio construction and reviews. Explain factor investing to me as a complete beginner. Cover: (1) what a factor is and why it might persistently deliver excess returns; (2) the five most evidence-backed factors and a plain-English description of each; (3) how factor tilts would change a standard index portfolio; (4) the risks and potential long periods of underperformance for each factor; (5) a simple example of how someone with a {PORTFOLIO_SIZE} portfolio and {TIME_HORIZON}-year horizon might consider a small factor tilt without overcomplicating things. Avoid jargon where possible, and if you must use a technical term, define it immediately.