“A friend who also happens to be a doctor once told me that if he practiced medicine the way he’d been investing, he’d kill half the people he saw.”
– Carl Richards from his most recent book, The One Page Financial Plan.
Just as most doctors read peer-reviewed evidence before prescribing medication, successful investors use evidence-based research to build portfolios that will stand the test of time.
It’s easy to get trapped into believing that your gut instincts, inside information or sheer intuition is the key to picking winning stocks. When we take a step back and look at the numbers, history tells us that nothing could be further from the truth.
Over the last 30 years, technological advances have helped financial economists conduct a new level of research and analysis on historical pricing information. Taking the conclusions gleaned from running scenarios on the data, they wrote peer-reviewed research papers that were published in respected industry journals.
In the same way a physician considers historical evidence and peer recommendations, successful investors follow the same scientific process. By fighting their instinct to act on hunches, and placing their trust in scientific research, these investors are able to realize greater satisfaction with the results.
As a patient or investor, knowing that an evidence-based process is in place brings you peace of mind and confidence. After all, with your serious money, would you rather rely on decades of academically proven research and processes–or a crystal ball and bits of advice overheard at the water cooler?