"Diversification is the only free lunch."

- Harry Markowitz

"In the short run, the market is a voting machine. In the long run, it's a weighing machine. Diversification helps balance both."

- Warren Buffett

A successful team in cricket is often about the composition of the team rather than the individual star player. The relationship between single factor and multi-factor strategies is no different in this regard - the team is the combination of the individual factors into one multi-factor strategy. A factor can undergo prolonged periods of underperformance with disillusioned investors running out of patience before the benefit of exposure to that factor is reaped.

There is no right or wrong answer as to how many and which factors to include in a strategy, but all the benefits of diversification apply to factor investing as well. A multi-factor approach can offer diversification and smoothen the ride through the investment journey by harvesting multiple sources of returns.

The challenge of a multi-factor portfolio is to decide how many factors to include and what approach to take. The answers can be easily found in the investor preference and objectives themselves. Investors who prioritise returns over costs may prefer a portfolio strategy dominated by momentum, while those with a strong preference for stable, consistent returns may consider low volatility to be the foundation of their portfolio. When designing a strategy for an astute investor segment with higher risk tolerance, one may consider concentrated single factor strategies to be appropriate. On the other hand, when designing a strategy for a wide variety of investors, a multi-factor strategy may serve the purpose best.