Investing: The Evidence

We are different to other financial planning firms. Our investment philosophy is based entirely on evidence.

Evidence-based Investing

If you go a doctor, and they recommend medication or surgery, you would assume they are basing that advice on evidence, evidence that the treatment has consistently worked for patients in the past. You would also expect them to have studied medicine to a very high level.

There is absolutely no reason why investment advice should be any different. For several decades however, it wasn’t like that at all. Financial advisers in the UK were paid commissions by fund management and insurance companies to sell their products until 2012, and more expensive products generally earned higher commissions. Millions of people were therefore being sold investments that they would have been far better off keeping away from.

Historically, advisers have, in the large part, recommended high-fee, actively managed funds- funds that try to outperform the market through a combination of stock picking and market timing. However, evidence overwhelming demonstrates that only around 1% of the funds beat that of the market over the long-term, net of costs.

Moreover, the very few funds that do outperform are almost impossible to identify in advance.

There is, however, an alternative. Over 60 years of independent, peer-reviewed and academic research has shown that the most efficient way to invest is simply to buy and hold a broadly diversified portfolio of low-cost index funds and, other than rebalancing your portfolio every year or so to restore the original asset allocation, to keep trading to an absolute minimum.

In the United States there is a huge rise in the popularity of index funds, but in the UK most advisers continue to recommend actively managed funds instead. By contrast, Private Capital has been one of the front-runners of evidence-based investing. We have been able to save our clients tens of thousands of pounds a year in investment fees alone, by using low-cost funds.

evidence investing
Keith Cuthbertson, Professor of Fiannce, Cass Business

“What is needed in the investment world is clarity and the long view. These videos provide both”

William McNabb, CEO of the Vanguard Group

“On the topic of investing this new documentary is the best 45 minutes you will ever spend. With the help of clear and compelling experts, it lays out what everyone interested in the markets must know. It will be required viewing at Vanguard!”

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