Ep # 107 - Skeptic to Advocate: Robin Powell's Journey into Evidence-Based Investing
Worried about making financial mistakes with your retirement portfolio?
Robin Powell, founder of The Evidence-Based Investor, joins Joe Curry, retirement advisor, to explore the transformative power of evidence-based investing. Robin shares his journey from journalism to becoming an advocate for passive investing, highlighting key moments such as meeting Vanguard founder Jack Bogle and uncovering the overwhelming evidence supporting long-term, low-cost strategies for portfolio management. Together, they discuss the misconceptions surrounding traditional investment advice, the importance of staying patient, and the actual value that financial advisors provide beyond stock-picking—focusing on personal goals, estate, and tax planning.
What You’ll Learn in Today’s Episode
Robin Powell's Journey to Evidence-Based Investing: After producing a documentary on passive investing, Robin transitioned from a journalism career to evidence-based investing, which changed his perspective on the financial industry.
Meeting Jack Bogle: A pivotal moment in Robin's journey was meeting Vanguard founder Jack Bogle, who inspired him with his mission to help investors rather than profit from them.
Misconceptions About Active Management: Robin emphasizes that, despite the evidence showing the superiority of passive investing, many investors and industry professionals still cling to outdated beliefs about active fund management.
The Role of Financial Advisors: Good financial advisors provide value beyond picking stocks or active funds. Their value lies in helping clients plan for long-term goals, tax and estate planning, and sticking to a disciplined investment strategy.
The Importance of Evidence: Robin underscores that the principles of evidence-based investing are grounded in decades of research and Nobel Prize-winning studies, proving that beating the market consistently is nearly impossible and to have patience with low-cost, diversified strategies.
Ideas Worth Sharing
“I thought I knew about investing, but it turned out I absolutely didn’t." - Robin Powell
“The problem with the average investor isn’t that they don’t know enough, it’s that they know things that actually aren’t so." – Robin Powell
"There is no easier person to fool than yourself." – Robin Powell
“The key to successful investing is buying a plain, boring, vanilla ETF and holding it for the long term." – Robin Powell
Resources
The Evidence-Based Investor website
How to Fund the Life You Want – by Robin Powell. An accessible and practical guide to personal finance that busts myths, clarifies jargon and provides the best options for building your wealth.
Unlocking the Power of Evidence-Based Investing: Insights from Robin Powell
Joe sits down with Robin Powell, a journalist and advocate for evidence-based investing. Powell, the founder of “The Evidence-Based Investor”, shares his journey from skepticism to becoming a leading voice in promoting this strategy. Here's what investors can learn from his transition and why evidence-based investing is key to long-term success.
From Journalist to Evidence-Based Investor
Powell’s transition from television journalism to evidence-based investing was a turning point in his career. He explained how he was initially skeptical after being approached by a financial firm to create a documentary on passive investing. However, after interviewing experts and Nobel Prize winners, he realized how much evidence supported an evidence-based investment strategy. "It changed my life," said Powell, emphasizing that the overwhelming data on market efficiency led him to make this his mission.
What is Evidence-Based Investing?
At its core, evidence-based investing relies on academic research and data to guide investment decisions. Unlike actively managed funds, where professionals try to beat the market by picking stocks, evidence-based investing acknowledges that markets are incredibly efficient. With access to the same information, it's nearly impossible for active managers to outperform the market consistently.
Powell pointed out that the foundation of this strategy has been around for decades, and it isn’t a "new-age trend." He referenced Louis Bachelier’s 1900 paper, “The Theory of Speculation”, and research by Alfred Cowles in the 1930s, which both demonstrated the difficulty of outperforming the market without insider information. "Even back then, unless traders had inside information, they couldn’t beat the market," said Powell.
The Jack Bogle Influence
One pivotal moment in Powell’s journey was meeting Jack Bogle, the founder of Vanguard and a pioneer of low-cost index funds. Bogle’s mission was simple: to help everyday investors by offering low-cost, passively managed funds. According to Powell, Bogle's humility and dedication to helping people rather than enriching himself left a lasting impression.
Though Bogle was not a fan of exchange-traded funds (ETFs) due to their potential for frequent trading, Powell believes that "plain, boring, vanilla" ETFs can be valuable if investors hold them long-term. This key takeaway emphasizes that it’s not the investment vehicle—whether mutual funds or ETFs—that matters most, but rather the strategy behind it.
Why Investors Struggle to Accept the Evidence
Despite the overwhelming research supporting evidence-based investing, Powell acknowledged that many investors still resist this approach. "People believe what they want to believe," he noted, quoting Charlie Munger. The idea of beating the market or picking winning stocks is alluring, even though it's rarely achievable.
Part of this resistance comes from the financial industry itself. Many asset managers and financial advisors are vested in promoting active management strategies, which often generate higher fees. Powell stressed the importance of finding an advisor who embraces an evidence-based philosophy and focuses on adding value through services like estate planning, tax planning, and ensuring long-term financial security.
Final Thoughts
Powell's insights make it clear that evidence-based investing is not just a trend; it's a proven strategy backed by decades of research. Investors looking for long-term success should focus on efficient, low-cost funds and resist the temptation to engage in short-term trading. Powell says, "There is no easier person to fool than yourself."
For those interested in learning more about evidence-based investing, check out “The Evidence-Based Investor” or listen to more episodes of “Your Retirement Planning Simplified” to learn from experts like Robin Powell and other thought leaders in the industry.