Evidence-Based Investing
The investment world has never appeared more complex and daunting. New financial products are regularly pushed at investors by salesmen and often without regard to personal circumstance. The media regularly bombards investors with notoriously short focused ‘glee’ or ‘panic’ stories. Then there are the unfortunate investors who’ve found themselves the victim of financial fraud.
It appears a discouraging landscape to navigate, yet it’s really quite simple. If you use an evidence based investment philosophy. Acknowledge markets are unpredictable, but their rewards can be captured; if you don’t fall prey media distraction. If you don’t expose yourself to unproven methods, it is possible to have a successful investment experience.
At Schuh Group we don’t take unnecessary risks and we don’t adopt unproven strategies – we rely on evidence by focusing on what drives investment returns. When investing for clients we focus on these key principles:
A belief in capital markets
Risk and reward are related
Diversification reduces Investment Risk
Asset Allocation determines performance
Maintaining discipline
Traditional active investment managers strive to beat the market – they rarely succeed.
Studies have shown less than 10% of active investment managers consistently outperform the market and when their fees are taken into account that figure falls to less than 1%.
Markets throughout the world have a history of rewarding investors for the capital they provide. Allocating funds to the sections of a market that offer long-term risk and return characteristics is shown to be the most successful way to capture market returns.
So the question is: why continually try and outwit the market when it exists to work for you?
This chart compares the returns delivered by the US share market over a 20-year period, against the returns of the average equity investor.
As you can see, there’s a significant difference between market returns and what the average investor achieves. And there are pointed reasons why the average investor continues to deny themselves those higher market returns:
Paying high fees
Focusing on pre-tax returns
Trying to time the market
Failing to diversify
Chasing last year’s winner
118 years of Australian share market returns illustrate if an investor picks and sticks with a strategy that works with the market, their patience will be rewarded.
At Schuh Group, we work with the market and focus on what we can control. We welcome you to contact us today and find out how we may be able to assist you to put an investment strategy in place in order to help you reach your financial goals.