Investors are not rational, but are they academic?
There is a saying; a different approach, results in a different outcome.
For the case of our podcast guest, Dr Steve Garth, that is 100% true.
Steve brings together a rare combination of abilities that has taken him to the highest levels of academia, finance and business.
He has a suite of degrees; a PhD in Mathematics, a Master of Applied Finance, a Bachelor of Science (Honours in Physics) and an Arts degree in History and Politics.
And now he is a Principal at Principia Investment Consultants, and sits on many Investment Committees for Financial Advice businesses (including our own at Stephan Independent Advisory).
But how does an academic end up in the investment space?
“Analysts and big broking houses do everything based on what they know. But it’s only what they know now. And I looked at that and thought, that’s not really a good evidence based way of investing because you’re making a stack of assumptions”, says Steve of his foray into investments.
So Steve started applying an academic approach to investments, that is, he shifted the basis for investment decisions away from intuition and assumptions, to instead being firmly grounded in research.
“Financial markets are not rational. There is no such thing as a rational investor”, advises Steve, “but they aren’t purely behavioural either”.
Upon this understanding, Steve formulated his new approach; evaluating investments through evidence-based, academic rigour.
Steve now partners with Financial Advisor firms and Institutions to help others do the same. Steve works with financial advisers to help develop and implement their own investment philosophies and processes.
So, it does seem that through an outsider’s perspective, a fresh new light has been cast on the traditional approach to investments.
Hear the full conversation with Dr Garth’s on Episode 19 of It’s Never About Money.
