How to Put Evidence-Based Investing Into Practice

Eliminate Meaningless Questions

• What is the best way to capture market returns?

• Do professional money managers perform better than market indexes?

• Can you beat the market by identifying great money managers?

• Can market timing improve returns?

• Can investors overcome the fees charged and taxes generated by money managers?

Ask Meaningful Questions

• What is the role of bonds and what types of bonds are most appropriate?

• Is it advantageous to diversify overseas?

• Can small stocks be safely included in diversified portfolios?

• Are value stocks preferable to growth stocks?

• Should diversified portfolios invest in assets other than stocks and bonds?

Apply the Evidence

• For investment selection, both passive (indexed) and broad-based market funds have the essential characteristics of being low cost, tax-efficient, and transparent.

• Rebalancing ensures a commitment to long-term risk control and can enhance return. Simply put, rebalancing allows you to systematically purchase investments that have declined in price and sell investments that have increased in price.

• As legendary investor Sir John Templeton said, “For all long-term investors, there is only one objective: maximum total return after taxes.”

Monitor for Effectiveness

• The last step, monitoring for effectiveness, is a very important part of the process. We refer to it as “robust investment oversight” which we believe significantly enhances investment results by eliminating needless risk.

***

Savant Capital Management, a fee-only wealth management firm with some $5 billion in assets and a financial advisory team of about 40 individuals, based in Rockford, Illinois.