I recently saw a brief video by a colleague Matt Hill where he explained how much easier it is today to talk with clients and prospective clients about an evidence based investment approach. He is right. Over the past decade or so, an evolution has started to occur among the investing public. Transparency and simplicity are finally resonating.
Almost 20 years ago when we first started working with Dimensional Fund Advisors, very few of our clients had ever heard of “passive” or “active” investing. Over time, the nomenclature has changed somewhat to more accurately reflect this type of investing as “evidence based”. Decades of market data provide this evidence and as with most other forms of truth, you ignore the evidence at your own risk.
The traditional financial services firms (brokers, insurance companies, banks, etc.) treat investing as a huge “guessing game” where they sell you the “best guesses” in the form of overpriced investment products. By relying on market evidence, investors can take the guesswork out of investing and avoid the cost that the market extracts from mutual fund managers that try to outsmart the market.
More than ever, astute investors understand the importance of owning a globally diversified portfolio and maintaining this exposure across both good and bad market cycles. The best way to stay invested in turbulent times is by focusing on why you are investing in the first place. The primary reason you are investing usually is to finance something many years off in the future.
Evidence based investing allows you to consider on possibilities, not just probabilities. It provides a path for managing behavior and controlling emotions by concentrating on what markets provide in the long term. In essence, the evidence based approach is a way to make smart choices about your future. Investing is…more than numbers. Ready for a real conversation?