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A Scientific Framework for the Art of Investing

Scientific progress is evident in virtually every aspect of our lives. The magnitude of change over the last few decades is overwhelming in every way except one—the way most people make their investment decisions.

Science and the field of medicine have deeply benefited from an evidence-based point of view to solve problems and answer difficult questions. And now, so has investing.

Enter Evidence-Based Investing (EBI), a well-organized investment approach that uses historical data, research, and our collective knowledge of risk and return to maximize the likelihood of reaching your desired outcomes, while minimizing risk and reducing frictions from high costs and taxes that can negatively impact your results.

As compared to more conventional investment approaches that are commonly driven by emotion, instant satisfaction, and market timing, the Evidence-Based Investing approach relies on wisdom, facts, data, and time spent in the market.

To expose the many downsides of the conventional approach and provide a road map to investing success, Savant developed a whitepaper that introduces the concept of Evidence-Based Investing. The paper helps investors best capture market gains, while avoiding the pitfalls of conventional approaches, such as market timing.

Before we discuss how EBI works, let’s differentiate the conventional investor from the evidence-based investor so we can better understand each.

Conventional Investor vs. Evidence-Based Investor

  • The conventional investor views markets as an opponent for them to outsmart. The evidence-based investor views markets as an ally and appreciates their collective wisdom.
  • The conventional investor emphasizes feelings over facts. The evidence-based investor utilizes facts and emphasizes process over outcome.
  • The conventional investor scours the world for numbers that fit their narrative. The evidence-based investor welcomes opposing data and reserves the right to change their mind when necessary.
  • The conventional investor compounds their mistakes through attempts at timing the market. The evidence-based investor understands compound interest and thus the importance of time in the market.

How does Evidence-Based Investing work?

Savant’s investment philosophy is designed to build globally diversified portfolios that minimize unrewarded risks and maximize after-tax return. EBI offers a way to put our philosophy to work by answering investment questions in an orderly, analytical, and scientific manner via a four-step process.

Step #1: Challenge Conventional Wisdom

Conventional investment wisdom tries to answer questions that cannot be validated. There are countless unverifiable questions and statements that dominate investment news daily, so EBI uncovers the right questions to ask.

Step #2: Ask Meaningful Questions

These are questions that are tailored to the individual investor and have answers that can be proven or disproven with reference to evidence. This requires the collective knowledge of an experienced investment team.

Step #3: Apply the Evidence

Once the right questions have been asked, evidence can be applied to solve problems that integrate both the advisor’s expertise and the individual investor’s personal values and goals.

Step #4: Monitor for Effectiveness

The final step in EBI is evaluating the effectiveness and efficiency of the process. This involves closely analyzing portfolio performance (after all costs) and revisiting the investor’s goals and values.

Built on logic and supported by compelling data, we believe Evidence-Based Investing can put you on a path toward building your ideal future. To help you understand the process, we will take a deeper dive into the four steps through additional blogs and informational videos.

For more information, download our EBI whitepaper or consult with your financial advisor.

Philip R. Huber Philip R. Huber Chief Investment Officer

Phil has been involved in the financial services industry since 2007. He is a member of the CFA Society of Chicago and is regularly featured in notable media outlets. In 2018 and 2019 Phil was named one of Investopedia’s Top Financial Advisors.

About Savant Wealth Management

Savant Wealth Management is a leading independent, nationally recognized, fee-only firm serving clients for over 30 years with more than $9.5 billion in assets under management and assets under advisement (as of 12/31/2020). As a trusted advisor, Savant Wealth Management offers investment management, financial planning, retirement plan and family office services to financially established individuals and institutions. Savant also offers corporate accounting, tax preparation, payroll and consulting through its affiliate, Savant Tax & Consulting.

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Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments and/or investment strategies recommended and/or undertaken by Savant, or any non-investment related services, will be profitable, equal any historical performance levels, be suitable for your portfolio or individual situation, or prove successful. Please see our Important Disclosures.