An Investment Philosophy versus An Investment Outlook

Maui SunsetOur Philosophy of Investing flows directly from two sources: First, your specific goals. Investing is at its core a funding medium for a financial plan. A financial plan is derived from specific goals; Second, we utilize the evidence from market science. We go where the science leads us.

Our philosophy is sometimes called “Evidence Based Investing” and contrasts sharply with “Conventional Investing” that is derived mostly from market forecasts and predictions. We utilize the power of the markets instead of trying to invest based on a market outlook.

The Tenants of Evidence Based Investing:

  1. What will happen to stock prices next week, next month or next year is unpredictable…by us or anyone else. We, however have perspective from many decades of market history about what to anticipate over your investing lifetime…and your investing lifetime is the only timeframe that really matters.
  2. What occurs in the financial markets is uncontrollable. It is not possible to engineer or control outcomes. Our philosophy focuses on inputs that can be controlled (saving, spending, time, asset allocation and behavior).
  3. The short-term performance of a portfolio or components within a portfolio is irrelevant to achieving long-term financial planning goals.

From time to time we encounter investors who can’t articulate long-term goals. Investing outside the framework of long-term goals is not really investing at all but instead is mere speculation. Of course speculation is the primary context for the investment product driven system of investing that we call “Conventional Investing”.

French mathematician Louis Bachelier, in his doctoral thesis from 1900 wrote, “The aggregate of speculators at a given instant, can believe in neither a market rise nor a market fall, since for each quoted price, there are as many buyers as sellers”. In many ways, Bachelier’s work was the origin of modern financial science. Investors have but two choices: ignore the science and cling to the predictions of the product pushers; or embrace the science and invest accordingly.

Our philosophy of investing is sustainable, it is self-replicating; Investing based on forecasts and predictions is not. Ready for a real conversation?

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