Even the best financial plans are for nothing if they fall prey to poorly executed investing. To implement your Financial Life Map, we’ll help you structure and manage your portfolio according to three essential evidence-based principles:
- Asset allocation. How you allocate your investments (and keep them allocated) across various market asset classes plays a far greater role in varying your long-term returns than does the individual securities you hold.
- Global diversification. Through broad and deep diversification, the sum of your whole market risk can actually be lower than its individual parts.
- Cost control. The less you spend on investing, the more you get to keep. (You’d think this would be a no-brainer, but it’s among the greatest deterrents to most investors’ financial success!)
To implement our evidence-based investment strategy, we focus on maximizing evidence-based returns, managing the market risks involved, and minimizing the costs along the way.
Think of how many outside influences affect your investment decision-making. There’s the media, all too ready to blast any sign of bad news. There are the thousands of self-designated financial “gurus” who shell out advice online. There are your friends and family members, each of whom has their own opinion about how to protect and grow assets.
Evidence-based investing (EBI) is an investment planning methodology that aims to cut out all of that noise. EBI focuses on the facts, and only the facts. What’s the risk associated with a potential investment? What’s the possible return? What financial indicators can we look to for guidance? What’s our investment discipline?
We advocate and implement evidence-based investing because it only considers the information that’s relevant to investment planning decisions. It eliminates bias, emotions, and many of the other outside influences that can sometimes cloud our decision making. The best investment planning processes are those that are disciplined and fact-based, which is why we prefer evidence-based investing.