Ask your questions for our Q&A with The Evidence-Based Investor 💬

We’re going to be hosting a series of Q&As here with some of our favourite thought leaders on investing and startups. Our aim here is to invite guests who will share a variety of different perspectives on investing. Not everything that they say will necessarily reflect Freetrade’s views but hopefully it will be thought provoking!

To get started, Robin Powell aka ‘The Evidence-Based Investor’ will be answering questions from our community here next week :fire:

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Post your questions for him to answer below but as always, please don’t ask for investment advice.

In case you’re not yet familiar with The Evidence-Based Investor yet, Robin’s podcast & blog are a series of investment ‘mythbusters’, that help explain topics like active vs passive investing & counter some of the slightly more suspect advice that you might see in the media :eyes: The episodes on indexing & ETFs are a couple of my favourites.

You can Recommend guests for Q&As with the Freetrade community too.



And if you’ve only just heard about us :relaxed: Freetrade enables you to put your savings to work without paying fees, in simple to use mobile app. Start investing today.

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What are the key ingredients for a DIY investor to out perform the market?

What is the appropriate mix between investing in passives like ETF vs DIY stock-picking?

Factor based investing is one of the new trends in asset management, have you seen successful ways that this has become accessible to the DIY investor in their stock picking?

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What are the basics you look for in a stock before deciding to investigate the stock deeper?

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  • What do you think of the late Jack Bogle’s warning that index funds are becoming ‘too big’ and that the major index-fund managers will have too much voting control, which may not be in the best interests of the market/investors?

  • What do you think could be done about this?

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What average yearly return do you consider ‘good’ over a 10-year timeline?

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Bullish, bearish or neutral on Bitcoin long term? Thoughts as an emerging asset class? Crypto ETFs any time soon?
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As someone who writes extensively about best practices in investing, do you practice what you write and what is your 10 year annualised return?

I ask because I read a lot about investing and I give more weight to people based on quantifiable success. Thanks for the Q&A.

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How long do you hold on to a losing investment for? What signs would you look for that would make you sell at a loss?

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Are their particular industries or sectors that you generally avoid as a rule? If yes, what do you need to see to break these rules and invest anyway?

Hi everyone. Please remember I’m a journalist and not a financial adviser. But I’m happy to try to help you if I can.

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I would actually question why anyone needs to beat the market at all. The industry and the media place far too much emphasis on it. It’s actually very difficult to do over the long term, and only a tiny fraction of investors achieve it on a cost- and risk-adjusted basis, including the professionals. In my view, it’s far better simply to capture the market return as cheaply and efficiently as possible.

Picking individual stocks is a bad idea. After costs, it’s extremely hard to outperform the broader market. It’s also very time-consuming. I would always recommend investing instead in a low-cost index fund or passively managed ETF, and to enjoy both the risk and return benefits of broad diversification.

Factor-based investing has not had a particularly good run, but there is plenty of peer-reviewed academic evidence to show that tilting to factors such as size, value and profitability can be a good strategy over the very long term. It does come with a higher degree of volatility, though, so there’s a definite trade-off. But it’s far, far better to use a low-cost factor funds than to pick stocks.

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I don’t pick individual stocks and wouldn’t encourage people to try it. The markets aggregate the knowledge and expertise of millions of investors around the world. Everyone has access to the same information at the same time, and new information is reflected in prices within seconds. The chances that you, as an individual, know something the market doesn’t are very small.

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We are a long, long way off any significant impact on market efficiency or price discovery from the growth of passive investing, especially outside the US. Indexing still has much further to grow. For me, this isn’t an issue that investors should be worried about in any case. Their primary responsibility is to themselves and their loved ones. It’s up to the industry, regulators and politicians to think about the bigger issues.

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I’m not convinced by the argument that returns are going to be lower in the future, although I can see the logic behind it. But I think it’s sensible to err on the low side when setting expectations. A 4.5% real return for a 60:40 stock-and-bond portfolio is about right.

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I haven’t a clue about the future direction on Bitcoin. What I do know is that speculating on cryptocurrencies isn’t investing at all. You could easily lose a lot of money. I wouldn’t do it.

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One of the biggest benefits of long-term, buy-and-hold indexing, with regular rebalancing, is that you don’t have to worry about “losing investments” at all. You can guarantee owning all of the 4% or so of publicly listed winners that drive market returns. Buy a low-cost index fund, rebalance every year or so and forget all about it. Life’s too short to be constantly checking stock prices.

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Thanks for your questions. Keep your costs as low as possible, diversify and stay the course!

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A common argument against indexing is something like “why’d you want to own loads of losers?”, so I like this way of putting it. It’s very hard to predict those few winners so you might as well guarantee you do by owning it all. (I acknowledge that many in this community don’t particularly share that view, good luck to you all!)

Thanks Robin!

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so you are advocating the efficient market hypothesis.

However I don’t believe in the efficient market hypothesis fully due to a few examples:

Snap’s first day trading share price volatility
Zoom technologies share price on the IPO day of Zoom VIDEO COMMUNCATIONS (different company) (It was obvious that many investors wrongly placed investments in what they thought was the IPO company but was actually a penny stock.
Other experiences during my time as an investor when market sentiment (such as October 2018) drives share price movements even though there was not a change in fundamentals - rather there was a change in investor perception of fundamentals.

I aim to pick stocks that are either undervalued (rather tough and I only ever do very small positions here), or have a competitive moat in a fast-growing industry (AI).

@EvidenceBasedInvestor What do you think with regards to these few events?

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