Brian Knabe has some advice for investors worried about surviving the current financial meltdown: Talk to a doctor.
Evidence-based medicine allows doctors to apply standards of care while reducing risk to patients. The same approach to investing could help people maximize their returns in the marketplace and cut back on some of the worry that has ensued in the past few weeks, says Knabe, an Illinois physician who serves as a financial adviser for Savant Capital Management, an investment services and financial planning company.
Evidence-based investing, as Savant calls it in a white paper, applies a scientific approach to money. Financial research shows there are practices that can be followedsuch as using an effective bond strategy, diversifying stock holdings and seeking out alternative investmentsto ensure investments are sound and risk is reduced, according to Savant.
Much like the evidence-based bundles of medical processes supported by organizations such as the Institute for Healthcare Improvement, Savant hopes that by putting all the research in one place, more investors will apply the evidence as they seek shelter for their funds. Theres a lot of evidence out there but it hasnt been organized in a systematic fashion, Knabe says.
Applying a stick to your guns steady, systematic approach right now is Knabes advice to jumpy investors riding out the current financial crisis. A patient who follows a doctors advice for a cold doesnt turn around and ignore the advice for a heart attack, he says. Thats the time when you should be following the evidence the most.