Index-based or passive asset class funds focus on how to reduce the costs and frictions involved in capturing the market’s generous expected returns over time.
The magic behind diversification is found in a financial measure known as correlation, or the degree to which two asset classes move in similar patterns.
Evidence suggests your portfolio’s asset class mix has a much larger impact on its variation of returns, compared to stock-picking and/or market-timing techniques.
To appreciate evidence-based investing, it helps to look at its historical roots, planted more than a half-century ago, and incorporated into its early solutions: index and passive asset-class investment strategies.
How do you ensure your best financial interests are the top priority when you invest? One way is to use evidence-based investing instead of traditional active investing