When it comes to investing, most investors fall into one of two camps:
- Stock Pickers – those who try to outguess the market.
- Indexers – those who simply track it.
But there’s also a third approach: systematic investing, used by firms such as Dimensional, a global investment firm that applies academic research to practical investing, whose New Zealand investors can access strategy-based products like the Evidential KiwiSaver and Investment funds through Consilium. This method blends confidence in market pricing with insights from financial science to target higher expected returns.
Stock Pickers – Trying to outguess the market
Stock pickers and market timers look for opportunities they believe the market has missed, placing bets on which shares will outperform. While this can seem appealing, decades of research show little consistent evidence that this approach reliably beats the market after costs. Even highly skilled managers can find it challenging to maintain an edge year after year.
Indexers – Tracking the market’s return
Index investors aim to match the market by following a benchmark such as the FTSE 100, buying and selling according to the index provider’s schedule. While this approach is lower cost and transparent, it has limitations. Index funds can experience style drift, periods of underperformance, and exposure to companies that may no longer fit the index’s intended profile.
Systematic Investing – Evidence and discipline
Systematic investing, as practised by Dimensional, takes a different path. It combines broad diversification with decades of financial science to identify areas of higher expected returns. The approach is rules-based but flexible, enabling investors to capture these returns efficiently while staying disciplined through the ups and downs of the market.
Why it matters
Systematic investing isn’t about betting on the next big winner, nor is it about blindly following an index. It’s about applying evidence, research, and structure to investment decisions, improving the likelihood of long-term success. At Apex Advice, we bring this philosophy to life by working with partners such as Consilium, who make these strategies accessible for New Zealand investors through locally tailored solutions. Together, we help you invest with greater confidence and discipline for the long term. Reference: Insights adapted from Dimensional Fund Advisors.
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