So what does Evidence-Based Investing provide and why do we believe that Portfoliosense® offers a better experience, and consistently higher long-term returns, than traditional active strategies?
The chart (click the link below) provides a breakdown of the key elements of investing, comparing how each is approached by the alternative strategies.
Whilst probability dictates that over short-term periods there will be active fund managers that outperform our recommended approach (even after the impact of fees), academic evidence has proven that when considered over the long-term this becomes a very small number indeed. Furthermore, not only is it not possible to identify these in advance, even in retrospect it is difficult to distinguish whether the performance was achieved through skill or luck.
Furthermore, with today’s technology enabling all information to be known about all stocks almost instantaneously, the days of being able to identify an opportunity not seen by others are long gone. Consequently it is fair to assume that markets are generally efficient, meaning that the current price is a fair reflection of its value. This being the case we see no benefit in incurring high levels of trading costs in order to ‘tactically’ swap and change holdings in an attempt to exploit pricing inefficiencies or pick the next ‘winning’ stock.
Of course Portfoliosense® is far more than a purely passive strategy, whilst we embrace ‘long term buy and hold’ principles, we also look at means of obtaining ‘better than market’ performance, however rather than trying to outguess market prices (as attempted by active fund managers), we do this by structuring our portfolios to incorporate tilts towards ‘small’, ‘value’ and ‘profitable’ market sectors.
Consequently we are happy that Portfoliosense® continues to provide the optimum investment experience and performance for our clients, and at a lower cost than the active alternative.