Discover the Power of Evidence-Based Investing | rockwealth

Investing: The Evidence - A leading documentary on evidence-based investing from rockwealth

In this video, we explore the world of evidence-based investing and its benefits. You'll see how a disciplined approach to investing can lead to better long-term results. Join us as we dive into the research and data that support this approach. Don't miss out on this informative and eye-opening documentary from rockwealth. #Investing #EvidenceBasedInvesting

Learn more at: https://www.rock-wealth.co.uk/evidenc...

Investing for the Future:

Investing is important to prepare for major expenses such as housing, weddings, funerals, operations, holidays, children's education, cars and most importantly retirement.

People are living longer and spending 20 years or more in retirement without a regular salary.

Historically owning shares in companies or equities has provided the biggest investment returns over the long term.

01:33 Investing in Equities:

The speaker discusses how equities have historically provided higher returns than cash or bonds.

Performance of Different Asset Classes

A team from London Business School found that over the long term shares are the runaway winner in terms of investment returns.

Between 1900 and 2016 cash delivered an annualised real return of 1%, bonds returned 1.8% but shares produced an average annual return of 5.5%.

The annualised real return on UK equities between 1967 and 2016 was even higher at 6.9%.

03:56 Active vs Passive Investing:

The speaker explains active investing versus passive investing and why active investing can be a bad idea.

Active Investing:

Active investing involves trying to beat a market by engaging in different strategies such as picking stocks, timing the market or selecting managers who will do one of those things.

Only a tiny proportion of active managers outperform over the long term after costs according to a study conducted by Professor David Blake at the Pensions Institute.

Passive Investing:

Passive investing involves tracking the whole market rather than trying to beat it through active management.

Closet trackers are funds that claim to be actively managed but broadly track the whole market and are almost guaranteed to underperform after costs.

Active managers have to show conviction but they're just as likely to be wrong as they are to be right.

06:43 The Problem with Active Fund Management:

In this section, the speaker discusses how most funds are just closeted trackers and how active management is a zero-sum game.

Closeted Trackers:

About 70% of funds are just closeted trackers.

Only about 20% of fund managers could do better than them.

Skilled managers are extremely rare to find.

07:30 Zero-Sum Game:

Active management is a zero-sum game where for one manager to win, another has to lose.

It's become increasingly difficult for a single manager to outperform his peers consistently due to the mushrooming size of the fund industry.

08:43 Why Investors Continue to Use Actively Managed Funds:

In this section, the speaker explains why investors continue to use actively managed funds despite evidence that only a tiny number of them actually beat the market.

The active fund industry is extremely lucrative and firms have huge budgets to spend on PR and advertising.

Financial intermediaries have done very well out of active management and therefore have little incentive to point out what a poor deal investors receive from it.

The Rise of Passive Investing:

In this section, the speaker discusses passive investing as an alternative to active management and explains why it's becoming more popular among investors.

10:36 Passive Investing vs. Active Management:

Instead of paying for active management, investors are increasingly opting for index funds which aim to capture the returns of an entire market by tracking an index.

Passive investing should be called smart investing as it minimises the moving parts, decisions, and costs while maximising the chance of getting returns from capitalism.

11:27 - The Case for Passive Investing:

The random walk hypothesis and efficient market hypothesis support the case for passive investing.

A passive portfolio can go down just as well as it can go up, but smart investing is about minimising risks and maximising returns.

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