Evidence-Based Investing

Chasing tips and trying to guess the market, usually leads to misfortune. Some people are lucky to experience gains but it’s not a sustainable approach and unfortunately, luck isn’t always on our side. A solid long-term strategy will always work out better for you and your investments.

If you’re the type of person who’d rather follow their instinct than play it safe and choose what to invest in by looking at facts and figures, evidence-based investing isn’t for you.

What is Evidence-Based Investing?

Evidence-Based Investing (EBI) is a disciplined approach to investment management that combines the data we have from the past and present with the truth about the unknowable future.

Where traditional investment management may use forecasts, predictions or emotive judgement to guide their decisions, EBI would prefer to use facts, logic and empirical evidence.

The concept behind the EBI approach, comes from some of the greatest modern financial and academic minds, several of whom have won Nobel prizes for their work in this field.

Evidence-Based vs. Active (Traditional) Investing

An evidence-based investor buys and sells based on research, long-term observation, and historical data instead of active or traditional investing which follows current market trends and investment decisions appear to be more subjective. Below are the differences between the two.

Different foresight

• Active investors believe they can predict trading depending on the current climate.
• Evidence-based investors understand market swings are unpredictable and ignore the noise

Guided differently

• Active investors generally act on expert opinions which can be clouded by biases, changeable conditions, and blind spots
• Evidence-based investors are guided by leading financial economists

Timing

• Active investors believe that they must urgently act to make the right calls
• Evidence-based investors know that time is on their side and will give their strategy time to grow

Emotional Investing

Active Investing is directly correlated with emotional investing which entails making investment decisions based on how people feel about certain companies, whether good or bad news were released about a company’s CEO or a company’s morals or what they stand for and how they market their company.

Summary

Evidence based investors will earn expected long-term returns based on research, evidence, and observation. It also considers your personal goals and your individual risk tolerances.

Here at Pyrmont Wealth Management, we believe that when it comes to you, your money, your family and your time, evidence-based investing is the best way to ensure your future success.

Are you interested in learning about how you could benefit from evidence-based investing?

One of our advisers would be happy to assist you. Please call us on +852 2598 6777 or email us at info@pyrmontwm.com.