James-
You are heading in the right direction by capturing a small portion of potential active management benefits.
If you do not mind, I provide a few additional thoughts.
The 100’s of identified anomalies (what you call factors and I call behavioral price distortions) can be thought as ingredients used by active managers for building successful stock picking strategies. By using narrow ETFs you are essentially serving the ingredients to investors but not the strategy.
Using a culinary metaphor, you are serving up the ingredients, say flour, milk, and sugar, without the recipe executed by a skilled chef. The chef combines the ingredients to deliver a soufflé instead. Most agree that eating a soufflé is preferred to consuming raw ingredients!
So it is with best idea stock pickers. A recipe in the hands of a skilled chef adds value beyond the individual ingredients, just like a strategy in the hands of a skilled active manager adds value beyond anomalies. Investing in narrow, factor ETFs delivers only a portion of the potential benefit of active equity. There is considerable evidence supporting this contention.
Some additional comments:
• The factors you mention are not factors at all but rather are factor proxies. The actual factors are the unobservable drivers of investor buy and sell decisions. The goal is to identify measurable and persistent proxies for these factors which can be used to build superior portfolios.
• The truth is that we do not know what anomalies are capturing, risk or opportunity.
• CAPM predicts beta is the only factor priced by the market, so the very existence of so many anomalies soundly rejects the model. Anomalies are not part of CAPM but its destroyer.
• You mention timing ETF investments. Of course there is little evidence managers can successfully short-term time. In fact, a recent article “Abusing ETFs” presents evidence that those who invest in ETFs, as compared to a corresponding mutual fund, actually do worse. The authors contend that this is the result of the narrowness of the EFTs purchased and the lack of timing skill. Myopic Loss Aversion lurks around every corner and it seems investing in easily traded ETFs exacerbates this most common of cognitive errors.