1.
Evidence-based
An investment approach should be quantitative and based on observable data, including security prices and financial information, rather than opinion or speculation. An evidence-based approach with a repeatable formula allows clients to focus on their long-term goals.
2.
Embrace market pricing
The market is an effective information-processing machine. Each day, the world equity markets process billions of dollars in trades between buyers and sellers and the real-time information they bring helps set prices.
3.
Passive fund management
Investment returns come predominantly from markets, not from fund manager skills. Conventional active management isn’t worth the cost. Active fund managers consistently underperform the market’s pricing power. Rather than trying to beat the market using stock picking or market timing, we take an evidence-based approach to investing – grounding decisions in academic research.
4.
Consider the drivers of returns
There is a wealth of academic research into what drives returns. Expected returns depend on current market prices and expected future cash flows. Investors can use this information to pursue higher expected returns in their portfolios.
5.
Diversification reduces risk
The goal of asset allocation is to balance risk and reward by adjusting the percentage of each asset in an investment portfolio according to an investor’s risk tolerance, goals, and investment time frame. Holding securities across many market segments can help manage overall risk, and diversifying globally will broaden your investment universe.
6.
Uncertainty creates opportunity
Returns are compensation for taking on uncertainty. Without risk, there would be no reward. But there’s also a risk in not investing. If our money doesn’t grow over time, it won’t go as far in the future.
7.
Control what you can control
Many people struggle to separate their emotions from investing. Markets go up and down. Reacting to current market conditions may lead to making poor investment decisions. A financial planner offers expertise and guidance to help you focus on actions that add value. This can lead to a better investment experience.
8.
Tune out the noise
Daily market news and commentary can challenge your investment discipline. Tuning out the noise is crucial to being a successful long-term investor. We all know that markets rise and fall — so we can be disappointed by downturns, but we shouldn’t be surprised by them. Reacting emotionally to market volatility may be more detrimental to your portfolio performance than the drawdown.
9.
Harness the power of compounding
The ‘Rule of 72’ is a quick, beneficial formula popularly used to estimate the years required to double the invested money at a given annual rate of return. An 8% annual return on your investment would double your money in nine years (72 / 8 = 9).
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