Odds On

The Making of an Evidence-Based Investor

Greenleaf Book Group, 2016

15 min read

10 take-aways

Audio & text

What's inside?

Forget trying to pick individual stocks. It’s a loser’s game.

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Editorial Rating

Qualities

Analytical
Well Structured
Overview

Recommendation

For too many investors, the playbook is all too familiar: Chasing hot stocks and can’t-miss ideas leaves you with lackluster returns. Investment adviser Matt Hall feels your pain, and he has a solution. Hall calls it “evidence-based investing,” and the research he relies on shows that hardly anyone – not even the professional investor – is savvy enough to outwit the market. His alternative: Load up on low-fee index funds and then essentially ignore your portfolio during booms and busts. Hall uses the format of an engaging personal memoir to explain the mind-set underpinning his advice. He begins with his ill-fated stint as a trainee at a stock brokerage firm. The crux of Hall’s strategy remains timely, but part of his tale is a critique of the mostly outdated brokerage practice of raking in commissions by churning investors in and out of individual stocks. In today’s era of online brokers and $9.99 fees, that’s not the average investor’s biggest challenge. While never giving investment advice, getAbstract recommends Hall’s intriguing journey to investors seeking information about a long-term approach to portfolio management.

Summary

“The Briefcase Kid” Gets an Education

The typical investor thinks a winning strategy involves picking a few hot stocks and then trying to buy and sell those choices at the perfect time. In truth, this approach is a money loser, akin to strolling into a casino and hoping to beat the house. Wall Street brokers and the financial media do little to discourage investors from this sort of misguided gambling. After all, some brokers think it’s in their interest to keep their clients “in the dark” about how markets actually work.

“Evidence-based investing,” an approach that attempts to understand the underlying forces that drive financial markets, is a wiser strategy. At the most basic level, the rise of index funds underscores the wisdom of evidence-based investing. Index funds outperform actively managed funds, but they don’t attempt to pick winners, as managed funds do.

In 1999, author Matt Hall came to embrace evidence-based investing after a brief attempt at shilling stocks for a quota-driven firm. He had signed up for a training program at a stock brokerage company and was ecstatic when he was selected to learn the ropes of the securities business. The managers...

About the Author

Matt Hall is a speaker, an investment manager and the president of Hill Investment Group in St. Louis, Missouri.

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V. M. 7 years ago

In trading on the stock exchange, the percentage of risk is initially set, or the adventure is, after all, at most a mere speculation and the one who wins the timely fluctuations wins

Matt Hall