What is evidence-based investing?
Simply stated, to achieve the best outcome for you, evidence-based (passive) investing makes use of the best available evidence when designing and implementing your investment portfolio. Evidence-based investing aims to capture the returns of the market through a low-cost, long-term investment strategy based on the following principles:
- Establish your tolerance for risk and do not accept more risk than you are comfortable with.
- Diversify your portfolio using globally diversified exchange-traded funds.
- Manage the impact of inflation by investing in a well-balanced portfolio consisting of equities and bonds.
- Minimise costs by replacing expensive, actively managed funds with low-cost exchange-traded funds.
- Control your emotions, and avoid the noise to ensure you stay the course towards your desired outcome.
- Rebalance each year to ensure your portfolio remains aligned with your tolerance for risk.