Growing up I always wanted to be a Surgeon; Paediatrics or Gynaecology to be specific.
As fate would have it, as a teenager I suffered from epilepsy which left me almost incapable of doing anything for up to 48 hours after a seizure. I continued to have seizures whilst studying A-levels and soon realised that the risk of pursuing my dream of becoming a surgeon were too high. Studying maths at A-leveI and with a keen interest in the workings of the world, I decided Economics was my new dream!
In medicine there is a concept called Evidence-based medicine (EBM) this is a methodology for making clinical decisions that involves using the best available evidence from scientific research to guide practice. It makes natural sense, when you go to your doctor you would expect them to recommend treatment based on evidence and tried and tested methods, not on their speculation.
Why should this be any different when it comes to investing?
Well, for some of the financial advice profession, speculation is how they are perceived to add value. It can be easy to follow an active mandate and buy and sell investments depending on the flavour or topic of the month.
Studies have shown that a significant percentage of active fund managers underperform their benchmark over the long-term. According to a study by SPIVA (S&P Indices Versus Active), in the five years prior to June 2022, on average, around 88% of active European equity funds underperformed their benchmark (the S&P Europe 350).
So, is it possible to pick the 12% that outperform the market consistently? I doubt it.
“The number of managers that can successfully pick stocks are fewer than you’d expect by chance. So, why even play that game? You don’t need to.”
David Booth, Founder & Executive Chairman, Dimensional Fund Advisors
Starting as a fledgling adviser over 15 years ago, the investment solutions I was told to recommend went against everything I had studied. I knew their had to be a better way. I remembered back to my medicine studies and the Evidence-based Medicine approach and soon realised there was a similar method to investing. Evidence-based Investing (EBI) focuses on making investment decisions, where the investor uses the best available evidence from financial research to guide their investment choices.
Both methods rely on the use of evidence to inform decision-making, and both seek to minimize the influence of biases and subjective opinions. By using evidence to support investment decisions, EBI aims to improve the chances of achieving a successful outcome.
The investment approach at Totality Wealth is backed by noble prize winning economic theory and decades of empirical research. Our aim is to harvest market returns based on this evidence and provide you with a successful investment approach.
Thankfully, I haven’t had a seizure for over 20 years and this blip as a teenager has led me to a profession where I am grateful that I can share my knowledge with clients and help them see through the smoke and mirrors.
