Markets work well.  They are powerful mechanisms for quickly and continuously aggregating the wisdom of crowds.  Markets are highly “efficient,” meaning that the price of a market-based asset (stock, bond, etc.) already reflects all known information about that asset.  In other words, the price of every stock already incorporates everything that is known about the company, and any new information that comes along will quickly and efficiently be priced into the stock.

The implication of market efficiency is that attempts to “beat” the market – whether through stock picking, manager selection, or market timing – are highly unlikely to succeed.  Worse yet, attempts to beat the market are very costly (in terms of both fees and taxes), which nearly guarantees a losing bet for those who attempt it.

While this concept is counter-intuitive – it feels like smart people working hard should be able to beat the market – an overwhelming amount of both academic and real-world evidence has proven otherwise.

Fortunately for investors, long-term market returns are also powerful.  Those willing to accept these returns – rather than try to beat them – will outperform the vast majority of investors attempting to do better and will fully benefit from the market’s robust long-term performance.

By using only the most intelligently-structured and lowest-cost passive/index mutual funds and ETFs in our clients’ portfolios (such as those offered by Dimensional Fund Advisors and Vanguard), we ensure that Geometric clients fully capture these powerful long-term market returns.

This is the “evidence-based” approach to investing.