Today's investor is faced with a choice between three competing investment strategies; Conventional Management, Indexing and Evidence Based Investing. In addition, many investors want to align their environmental views with their portfolio objectives. But can you support your values while maintaining sound investment principles and pursuing higher expected returns? It’s a delicate balance but one we think can be achieved and it starts with the selection of a prudent investment strategy.
Conventional Management is based on the belief that markets are inefficient, enabling investors to outperform through superior stock or bond selection and/or market timing. Unfortunately, when we examine the record of Conventional Mutual Fund Managers, we find little evidence to support these claims. On the contrary, Conventional Managers as a whole consistently underperform markets by an amount equal to their inherently high costs and tax inefficiencies.
Indexing offered the first real alternative to Conventional Management. Rather than trying to outperform stock and bond markets, Indexers sought to deliver the performance of the markets by replicating the holdings of popular stock and bond indexes. Despite predictions to the contrary, more often than not choosing an index fund over a conventionally managed fund has led to above-average returns due in large part to significantly lower management expense. However, despite its positive track record we believe that Indexing can be improved upon.
Gasber Financial Advisors, Inc. endorses a prudent alternative to Conventional Management and Indexing - Evidenced Based Investing. Based on rigorous academic research and over eight decades of empirical data, Evidenced Based Investing is an evolution of the traditional Passive/Indexing approach and is anchored on four important principles.
Identifying a client's tolerance for risk is the first and most important step in a successful investment program. In order to insure an accurate assessment, we employ the FinaMetrica Risk Profiling System. Developed and tested in Australia over 4 years with the assistance of the University of New South Wales' Applied Psychology Unit, the FinaMetrica system has gained international recognition as a world's best practice since its Australian launch in 1998. Because risk tolerance can change over time, we retest clients on a three year cycle.