What is Evidence Based Investing?

Finger Print

(Hint: It’s the Evidence That Counts)

Evidence-Based Investing

vs.

Traditional Active Investing

Long-term market history

Near-term market forecasting

Peer-reviewed academic evidence

“Expert” opinions

Practical application

Speculative venture

Patient participation

Rapid reaction

How Do Traditional Active (TA) and
Evidence-Based (EB) Investors Differ?

THEY SEE THE FUTURE DIFFERENTLY

  • TA investors believe they can successfully predict when and how to trade on breaking news.
  • EB investors understand near-term market swings are unpredictable; they ignore the “noise.”

THEY WORK ON DIFFERENT TIMELINES

  • TA investors feel a sense of urgency to make the “right” calls to beat the market.
  • EB investors assume that time is on their side; they give their plan time to grow.

THEY ARE GUIDED BY DIFFERENT DETERMINANTS

  • TA investors act on “expert” opinions (which are vulnerable to biases, blind spots and changeable conditions).
  • EB investors are guided by peer-reviewed academic inquiry (for “steady as she goes” resolve).

THEY DEFINE “SUCCESS” DIFFERENTLY

  • TA investors define success as outperforming others or making a lot of money.
  • EB investors define success as being able to comfortably fund their personal financial goals.

THEY USE RISK DIFFERENTLY

  • TA investors don’t distinguish between market risks (factors that are expected to yield extra returns) and concentrated risks (which just add more risk).
  • EB investors manage market risk factors (and their expected returns) and diversify away concentrated risks.

THEY CONSIDER COSTS DIFFERENTLY

  • TA investors focus on cleverly timed trades over the costs, commissions and taxes they incur.
  • EB investors focus on minimal trading, understanding that the costs involved are among the biggest drags on their end returns.

Bottom Line …

EVIDENCE-BASED INVESTORS APPROACH INVESTING DIFFERENTLY

  • TA investors try to beat the market through clever stock-picking and market-timing.
  • EB investors participate in the market to earn expected long-term returns according to time-tested academic evidence, their personal goals and their individual risk tolerances.

That’s why, when it comes to your time, your money, your future 

AND YOUR FAMILY … we choose EVIDENCE-BASED INVESTING.

All investing involves risk including loss of principal.  No strategy assures success or protect against loss. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual

Gardner Sherrill, MBA, CFP

Gardner is a CERTIFIED FINANCIAL PLANNER and principal of Sherrill Wealth Management in Bradenton, Florida. He has spent 20+ years in the wealth management field helping families negotiate the various obstacles and opportunities that retirement provides them. Read More

>