Evidence-Based Investing

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Evidence-Based Investing
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What’s Evidence Based Investing?

Evidence Based Investing (EBI) is a highly disciplined approach to investment management we execute on behalf of high and ultra-high net worth investors. EBI seeks to filter through noise, information, hype and emotion in order to make reasoned investment decisions void of as much Investor Behavior Penalty as possible.

Approaching investing with a conscientious, explicit and judicious use of current best evidence can be a relief for investors.

It minimizes the time-consuming meandering path of exploring multiple investment options – many of which are ultimately unsuccessful – and concentrates their focus on higher probability of success approaches.

It’s a sane, rigorous response to an uncertain future, particularly when pursued with:

Objectively determined indicators

Discipline (through good and bad times)

Flexibility (shifting as evidence shifts)

Risk aversion (controlling losses)

Aim of Evidence Based Investing

The aim of Evidence Based Investing is to provide a comprehensive framework that seeks to give investors the highest probability of avoiding – or at least minimizing – the Investor Behavior Penalty.

You may think that it is a standard operating procedure within the financial profession to invest in this fashion, but it is not. Simply put, biases, limitations in knowledge and resources, emotions, marketing tactics, compensation models and business models can all interfere with this objective being achieved.

So, do-it-yourself investors and investors who delegate to professionals must be diligent in evaluating their exposure to methodologies outside the EBI discipline. In short, be frugal and demand long-term efficiencies, value add and solid rationale behind the strategy, approach, platform and each holding within the portfolio. The main reason we are proponents of fiduciary, fee-only, full breadth, full disclosure and a free-agency/open architecture approach is that the delegating investor can eliminate many of the common culprits (but not all) at the same time with these “Fundamental Five” standards.

There are five components in which Evidence Based Investing seeks to optimize results with well-established and substantiated best practices:

Asset Allocation

Determining how much to allocate to each asset class given client specific and market specific evidence.

Security Selection

Determining which passive or active vehicles/managers to utilize within each asset class given market specific and manager specific evidence.

Trading & Rebalancing

Determining when and how to trade and rebalance given market specific, tax specific, client specific and transaction specific evidence.

Tactical Adjustments

Determining when to strategically alter the investment mix weights away from normal in an attempt to capture excess returns (more gain and/or less loss) from shorter-term fluctuations based upon fundamental analysis and technical analysis evidence.

Investment Review

Having a comprehensive system of proper performance measurement and individual investor strength/weakness/circumstance measurement and utilizing these inputs to assess how each component of the investment process is working, determining whether the portfolio is on the right course for the individual investor and if any course corrections are advisable.


Our white paper entitled Evidence Based Investing for High and Ultra-High Net Worth Investors outlines the extensive research and proofs behind our approach. We highly recommend all investors read it.

Below are seven insights included in this paper. Please click each to reveal the key insight:

Key Insight #1

A properly constructed and managed asset allocation is proven to enhance the risk/reward characteristics of a portfolio and is far more influential on performance than security selection and market timing by a factor of 9 to 1.

Key Insight #2

In efficient markets where the odds of outperforming the benchmark are small, investors are better served by taking a broad passive approach. They gain the exposure to the asset class they desire, and do so at the lowest cost. In less efficient markets, investors could benefit from a carefully selected manager who seeks truly active management.

Key Insight #3

Investors should have the confidence that their wealth managers’ processes for selecting and retaining investments are thorough and robust, including all six categories of money manager evaluation identified in our paper.

Key Insight #4

Tax strategies play a key role in the investment process. They can lower the cost of managing investments, thereby maximizing the after-tax return. It’s important to note that tax avoidance should not be a top priority. After all, having a sub-optimal portfolio just to keep taxes at or near zero is akin to having the proverbial tax tail wag the investment dog. But since taxes are a real cost to the portfolio, having an investment process that proactively and continually addresses this optimization opportunity increases the odds of investment success.

Key Insight #5

Thirteen months is a reasonable frequency for portfolio rebalancing, but only when incorporated with prudent asset allocation and tactical asset allocation methodologies.

Key Insight #6

Investors with in-depth investment processes that include strong tactical asset allocation can reposition their portfolios and outperform the buy-and-hold investor over time. While there is a time and place for buy-and-hold, it is not a strategy for all investment seasons and all points in an economic cycle.

Key Insight #7

Investors must require their wealth managers to show properly calculated time-weighted returns so that an accurate assessment of the portfolio’s investments, relative to their respective benchmarks, is clear and informative.

To learn more and dive deeper into the above 7 KEY INSIGHTS, download the full white paper “Evidence Based Investing for High and Ultra-High Net Worth Investors” below.


To learn more and dive deeper into the above 7 KEY INSIGHTS, download the full white paper “Evidence Based Investing for High and Ultra-High Net Worth Investors” to see the extensive research behind this approach.

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