What is Evidence-Based Investing? How is it grounded in academia? In this brief video, we explain.
There’s a simple reason why the evidence clearly shows that the vast majority of investors, when attempting to “go it alone,” end up underperforming the returns available to them in the markets – emotions.
In this brief, 3-minute video, learn more about why I regularly say, “Successful investing is 1% intellectual and 99% behavioral.”
A study done by Cambridge University once again demonstrates why the vast majority of money managers who attempt to outperform markets by choosing certain stocks or engaging in market timing, simply fail. And, by building beautifully diversified portfolios of low-cost asset class funds (or at least low-cost index funds), one can avoid playing the loser’s game of speculation, which is at the root of active management and unfortunately how most continue to invest.
Please enjoy this brief, 3-minute video.
Long-term, historical academic evidence demonstrates that over time there are certain “factors” that can provide somewhat higher expected (albeit never guaranteed) returns vs. simply holding a capitalization-weighted market index. Some of these factors that can potentially add a premium return include value stocks, small company stocks, and stocks of companies who have demonstrated consistent profitability.
However, many who attempt to add these premium factors to their portfolios don’t ever reap the rewards of these higher expected returns because they are impatient and get lured into chasing recent performance of whatever has been “hot” of late. Behavioral psychologists identify this behavior as recency bias.
In the following brief, three-minute video we discuss some of these factors with Morningstar and how investors often end up with subpar performance because of their own behavior.
Minimizing investment transactions and expenses and not attempting to outsmart the markets via market timing or stock picking are hallmarks of successful, evidence-based investing. In this brief, three-minute video, another respected academic explains in simple terms why this is so important. Enjoy, and as always, feel free to pass it on to your family and friends.
Wall Street and financial services companies are infamous for slick marketing phrases, and continuously rolling out products with psychologically appealing names. In this brief, 3-minute video, we look at one of the most recent products that has been strongly marketed over the past few years using the name, “Smart Beta.” Unfortunately, most of these products are quite expensive, and are usually nothing more than attempting to mimic what Dimensional Fund Advisors has been doing for years, which is essentially tilting a portfolio toward asset classes with higher expected returns, such as value and smaller company stocks. I hope you enjoy this informative video, and if so, feel free to share it with family and friends.
Some recent research has shown that investors left to their own accord, may cost themselves as much as 3% annually in investment returns. This is what Tim Richards of The Psy-Fi Blog refers to as “The Human Factor” in this month’s brief video blog. This supports something I have personally said on numerous occasions: “Investment behavior is overwhelmingly the biggest determinant of investor success.” And, this further demonstrates why having a sound financial plan serving as the blueprint for an ongoing, non-emotional investment process is so vitally important. I’m confident you will find this video very informative, and as always, feel free to share it with any friends or family.
Benjamin Graham, Warren Buffett’s teacher, emphasized over and over again that an investor’s biggest enemy can be seen by simply looking in the mirror. In other words - ourselves. Because of this, the predominant role we play as a financial advisor (coach) is to serve as a buffer between our clients’ dangerous emotions of fear and greed and their temptation to give in to such emotions. Evidence clearly shows that most do-it-yourself investors, attempting to go it alone, end up with poor financial results over time. But there are certain concrete steps all investors can take to help protect us from ourselves. This brief, 3-minute video outlines what some of these all-important, yet practical steps are. As always, feel free to share this video with any friends or loved ones.
- Managing Investment Risk in Retirement
- Did you know that sound diversification is really the only “free lunch” in the world of investing?
- Wise Financial Advice During Retirement Can Never Be Emphasized Enough
- Are Investors Reluctant to Realize Their Losses?
- Which Risk Factors are the Most Important?
- Availability bias — a mental shortcut that can wreck your investments