“Investment success is about discipline, patience, and the ability to ignore short-term noise in favor of long-term goals.” — Lazetta Rainey Braxton, Co-CEO 2050 Wealth Partners
Like most investors, your overriding goal is probably maximizing long-term investment returns for your preferred level of risk.
To do this, you have three main options:
You invest with money managers who believe they can beat the market through superior stock selection and/or timing. While this approach may have a certain intuitive appeal—the reality is that historically, most active managers have underperformed their benchmarks.
You invest in index funds that try to track popular indices, such as the S&P 500. While your returns should approximately equal those of the indices (minus fees and expenses), you miss out on any potential opportunity for outperformance.
You invest in solutions grounded in financial science that tilt to investment factors that have historically delivered better results for investors over the long haul. The approach can seem slow and steady—a marathon runner conserving energy to complete the race—but it can be fruitful.
The evidence in Evidence-Based investing is based on best practices, data, and decades of academic research from esteemed economists, academics, including 11 Nobel Laureates. The objective is to provide investors with well-considered, long-term portfolios that aren’t based on emotion or guesswork.
A key part of this approach is tilting toward characteristics of stocks that have been identified by financial science as offering the potential for outperformance—and then creating strategies that overweight stocks with these characteristics.
An Evidence-Based strategy is a sound approach to investment. Need more evidence? Here are some important advantages:
Relying on clear-cut principles leads to practical results. With a data- and analysis-driven approach to investing, investment decisions are fact-based. And, if investors understand the logic behind their investment choices, they can make more informed decisions.
“I think factors are going to be transformative but in order for them to be very widespread, we need data and technology. We also need education and outreach which we saw during the 1990s for example with the rise of index funds,” says renowned economist and finance expert Andrew Ang.
With a diversified approach to investing, investments are spread across a variety of asset classes and factors, which helps reduce unnecessary risks. Emphasizing a long-term investment strategy helps investors steer clear of market fluctuations and volatility, which may reduce the risk of loss.
Evidence-Based portfolios are built with a variety of lower-cost investment vehicles, which reduces expenses. And the long-term focus means less trading—which helps reduce costs. In addition, the high turnover created by active management may also result in higher taxes.
Symmetry’s Evidence-Based solutions include Panoramic Mutual Funds and Models and PrecisionCore ETF Models, which are backed by well-known managers, including AQR Capital Management, Avantis Investors, Dimensional Fund Advisors, iShares by BlackRock, and State Street’s SPDRs Vanguard.
“Symmetry’s Evidenced-Based strategies put science on your side by investing in probabilities and not possibilities,” explains Regional Director Massimo Lantieri. “The sales team has collaborated with dozens of advisors and recommended our Evidence-Based solutions to help them meet their clients’ unique challenges.”
Problem: Symmetry’s sales team consulted with an advisor who has clients concerned about the global markets and fearing a market downturn. The advisor wants to keep her clients invested and needed direction to solve their concerns.
Solution: Panoramic 60/40 with a 25% Dynamic Defensive Overlay
The Panoramic models will continue to provide market exposure. In the case of a market downturn, the Dynamic Defensive overly will follow an Evidence-Based approach to systematically move out of the market and into cash. As the markets begin to improve, the Evidence-Based approach will begin to reallocate back into the market.
Problem: The sales team collaborated with an advisor who was concerned about his global portfolios. He wanted to increase his U.S. allocation and add some dynamic allocation to the model.
Solution: PrecisionCore 70/30 paired with our U.S. Sector Momentum strategy
The PrecisionCore 70/30 will continue to provide global exposure while the U.S. Sector Momentum strategy will follow an Evidence-Based approach to investing in the 11 sectors of the U.S. market by using the momentum factor as an overlay. The portfolio, which is 75% PrecisionCore 70/30 and 25% into the U.S. Sector Momentum, will increase the U.S. exposure up to 75% and provide a quarterly rebalance on the Sector Momentum component.
While using an Evidence-Based approach does require perseverance and control, it can provide a strong foundation for a more rewarding long-term investment experience.
Ready to learn more? Contact us to find out how Symmetry’s Evidence-Based solutions can work for you.
Symmetry Partners, LLC, provides this communication on this site as a matter of general information. Information contained herein, including data or statistics quoted, is from sources believed to be reliable but cannot be guaranteed or warranted. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. All content on this site is for educational purposes and should not be considered investment advice, recommendation or offer of any security for sale. Symmetry Partners does not provide tax or legal advice and nothing either stated or implied in this material should be inferred as providing such advice. Symmetry Partners does not approve or endorse any third-party communications on this site and will not be liable for any such posts.
Symmetry Partners, LLC is an investment advisory firm registered with the Securities and Exchange Commission (SEC). The firm only transacts business in states where it is properly registered or excluded or exempt from registration requirements. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission.