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"The ability to simplify means to eliminate the unnecessary so that the necessary may speak."
-Hans Hofman (20th century abstract painter) |
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The Weight of Evidence
The diagram below compliments of www.behaviorgap.com does a good job of visually contrasting the evidence for passive investing and active investing. The several dozen citations listed on the website are but a small sample of those supporting the thesis of passive investing over the past 60 years. All of that notwithstanding, every day, the grand majority of brokerage firms, banks, insurance companies and others wearing the moniker of "financial advisor" push hard in the opposite direction. Their livelihood may depend on it but yours may depend on resisting the lure of "the black box".
To View a Full Version Visit http://www.behaviorgap.com/woe/
Science evolves of course but it reveals certain truths that we need to understand. Financial journalist James Picerno recently said "there is no such thing as alpha (alpha means value added to an investment portfolio beyond the risk assumed). There are only the risks we know and the risks we don't know." Again, this statement runs directly counter to the vast majority of the financial services industry but it is aligned with the scientific evidence.
The only reason most investors still chase returns with these product peddlers is they believe ,at some level, that there must be some sort of "black box". The TV and radio ads are replete with hawkers trying to sell "risk free-guaranteed" systems that can tell you well in advance when to exit the market and when to return. These pitches tug on our emotions but are in direct contravention to the weight of the evidence. The difficulty is this- whenever the logical portion of our brain is engaged with our emotional brain, the emotional side usually wins.
We focus on strategies that use the science of the markets. We put these good ideas to work for the benefit of our clients. We are happy to visit with friends, family or colleagues who might benefit from a second opinion about their current wealth planning.
- James E. Wilson, CFP®
 My Blog
A Call to Action:
In two weeks, we will discuss the "Science of Irrationality" and how this applies to financial and investment decisions. Stay tuned!
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WealthRx® is J.E. Wilson's unique wealth management process, designed with successful physicians in mind. Learn more. Contact 