The evidence-based approach originated in the medical field to promote the use of clinical experience and the best available research to make decisions about individual patient care.1

In the investing world, this translates to a goal of using current evidence to help maximize an individual’s investment returns while minimizing risk from market downturns.2 In more simplistic terms, evidence-based investing (EBI) means that whatever you decide to do, make sure you have an evidence-based reason for doing it, and always be prepared to amend your plan when the evidence necessitates a change.3

While we’re happy to explain to our clients various investing and wealth management approaches, including EBI, please keep in mind that our advice is tailored to each person’s needs. What works for one client may not work as well for another. We’d love to talk with you about our individual approach to investing – give us a call, and we’ll be happy to set up an appointment.

Financial professionals who use evidence-based investing typically take a four-step decision-making process:4

  1. Eliminate meaningless questions.
  2. Ask meaningful questions.
  3. Apply the evidence.
  4. Monitor for effectiveness.

Another significant distinction about EBI is that it is commonly misinterpreted as passive investing. However, EBI is not so much about active versus passive management but rather is about keeping an eye on how much you pay for each investment and determining if what you’ve gotten in return is worth the price.5

Please remember that investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.


Content prepared by Kara Stefan Communications.

1 Michael Chamberlain. Investopedia. March. 28, 2017. “Comparing Traditional to Evidence-Based Investing.” Accessed May 26, 2017.

2 Michael Finke. ThinkAdvisor. Spring 2017. “The Rise of Evidence-Based Investing.” Accessed May 26, 2017.

3 Robin Powell. The Evidence-Based Investor. April 25, 2017. “Bob Seawright: Behavioral Finance Is as Much a Part of EBI as Indexing.” Accessed May 26, 2017.

4 Michael Finke. ThinkAdvisor. Spring 2017. “The Rise of Evidence-Based Investing.” Accessed May 26, 2017.

5 Corey Hoffstein. Newfound Research. Nov. 18, 2016. “What I Learned at the Evidence-Based Investing Conference.” Accessed May 26, 2017.

Leave a Comment