Jeff Buckner, CFP®, AIF®, Co-Chief Investment Officer
Our first two investment philosophy posts outlined core tenets of our investment approach:
- Embrace Market Pricing
- Don’t Try to Outguess the Market
- Resist Chasing Past Performance
The alternative to an active trading strategy, informed by our belief in efficient markets, is letting markets work for you through low-cost indexed investments. Rather than trying to guess the perfect fund manager who can beat the market, through a passive indexing strategy you can invest in whole markets, gaining massive diversification at minimal costs.
Fewer costs leaves more money in your accounts to compound over time. Historically, markets have rewarded long term investors with a buy and hold strategy. See the chart below to track the growth of one dollar invested in various indexes over the past 90 years. Notice how U.S. Stocks in particular have created immense wealth for investors willing to hold on for the long haul. The lesson from the Efficient Market Hypothesis is simple: if you can’t beat the market, join it!
Increasing numbers of investors are embracing market pricing and letting the market work for them. According to research from Morningstar, in 2016 a record $263.8 billion flowed out of U.S. active equity strategies, which are designed to beat the market. Much of this money flowed into passively managed U.S. equity funds, which took in $236.7 billion. We applaud this half a trillion dollar shift and see it accelerating moving forward.
When you create a goal in BrightPlan, our software assesses the risk you’re able and willing to take to achieve them. Then, we provide a custom Investment Plan for each goals. You can implement this plan in your existing investment accounts, or automate investing in your goal in a BrightPlan Investment Account. The investments BrightPlan Investment Accounts have low expenses, embrace market pricing, and diversify globally to help clients reap the rewards of disciplined long-term investing.
Want to learn more about how we build portfolios and what is inside? Check out the next installment in the Evidence Based Investing Series: The Smart Way to Fund Your Future.