How to Implement Evidence-Based Investing within a University Plan
Some academics are simply too busy to actively manage their investment accounts and retirement plans. As a result, they may select a set of funds or a model portfolio and leave it unattended, without adjusting for changing goals or time horizons.
Evidence-Based Investing (EBI) provides a framework that is designed to help overcome these challenges. Grounded in decades of peer-reviewed financial research, EBI emphasizes diversification, low costs, tax efficiency, and discipline. It aims to remove emotion and bias from investing by relying on a systematic, scientific approach.
For many university professionals, most retirement savings are typically held in employer-sponsored vehicles such as 401(a), 403(b), and 457(b) plans, which offer limited investment options that vary by plan rules and custodians. While these limitations may feel restrictive, there are still meaningful opportunities to implement an evidence-based approach.
Markets Work
One core principle of EBI is the belief that markets are broadly efficient. Prices quickly reflect the collective knowledge of millions of participants, making it difficult even for professional managers to consistently outguess the market.
Rather than trying to time entry and exit points, EBI emphasizes time in the market over timing. Remaining invested and riding out volatility helps avoid missing the market’s best days—which historically account for a large share of long-term returns.
By trusting that markets work, investors can focus less on prediction and more on discipline, which historically leads to more consistent outcomes.
Diversification Is Our Friend
Diversification has been called the only “free lunch” in investing—and for good reason. Asset allocation, or the mix of equities, fixed income, alternatives, and cash in a portfolio, has been shown to help drive long-term performance more than the selection of individual securities.
- Across asset classes: Stocks and bonds provide a traditional portfolio foundation, with alternatives adding another layer of diversification. Some employer plans may not directly offer alternatives, but investors may access broader options through custodial brokerage windows.
- Across factors: Research has identified factors such as size (small vs. large companies), value (low-priced vs. expensive companies), and profitability that help explain differences in returns. Factor investing seeks to harness these long-term drivers of performance while spreading risk more effectively.
- Across geographies: Evidence also shows that international diversification adds value. While U.S. markets have led in recent years, leadership between U.S. and international equities shifts unpredictably. Maintaining exposure to both developed and emerging markets can help reduce risk and capture opportunities globally.
By diversifying broadly, investors reduce the risk of being overly dependent on any single driver of returns.
Control the Controllables
While we cannot control market movements, there are several levers we can manage directly:
- Rebalancing: Over time, market swings can shift a portfolio away from its target allocation. Rebalancing realigns investments to their intended mix of stocks, bonds, and alternatives, helping to ensure the portfolio stays within an investor’s risk tolerance. Some employer plans even offer automatic rebalancing when allocations drift too far from targets.
- Asset location: Placing the right investments in the right accounts can improve after-tax outcomes:
- Roth accounts: Grow tax-free, making them well-suited for higher-growth or more volatile assets.
- Pre-tax accounts: Tax-deferred, making them a good home for income-oriented investments such as bonds.
- Taxable accounts: Offer flexibility, but interest and dividends are taxable annually, so tax-efficient strategies matter.
- Costs and behavior: Minimizing expenses, maintaining tax efficiency, and resisting emotional reactions in volatile markets are essential components of long-term success.
If investors focus on what they can control — taxes, behavior, and allocation—we believe they can tilt the odds of success in their favor.
There are far more dimensions to investing than can be covered in this article. For additional detail, Savant’s [Evidence-Based Investing whitepaper] is a helpful resource. And for those seeking more tailored guidance, consulting with a financial professional can help align an evidence-based strategy with individual goals and circumstances.
This article was authored by Zach Ivey, CFA®, CFP®, MBA, Chief Investment Officer at Savant Wealth Management, with contributions from financial advisors James Haygood, CFP®, AWMA®, and Aaron Dykxhoorn, CFP®, MS.
C. Zach Ivey
Chief Investment Officer
CFA®, CFP®, MBA