Evidence library
Every claim, with its sources and its limits
26 notes drawing on 57 sources. Each states a falsifiable claim, rates how strong the evidence actually is, and lists the conditions under which it fails. A finding without its caveats is marketing.
How we rate strength
- Strong
- Replicated across samples and methods, or true by construction. Acting on it is low regret.
- Moderate
- The computation is sound but its applicability depends on assumptions that may not match you.
- Contested
- Credible researchers disagree, or the effect has failed to replicate cleanly.
Browse by theme
All 26 notes, grouped by where they sit in the decision
Foundations
What has to be true before investing makes sense.
A cash buffer is what makes every other decision survivable
strongThe buffer's return is not its interest rate. It is the forced sale you never have to make and the 22% APR you never have to borrow at.
Saving and debt2 citations, 3 caveats
Clearing debt is a guaranteed return; investing is not
strongA 20% APR card is a 20% risk-free, tax-free return. No portfolio offers that. The interesting cases are the ones in the middle.
Saving and debt2 citations, 3 caveats
Unclaimed employer matches are the clearest mistake in personal finance
strongThis is the one decision with no trade-off to weigh. A 50% match is a 50% immediate return on the money contributed.
Saving and debt · Taxes · Retirement2 citations, 3 caveats
Defaults beat intentions, so remove the decision
strongThe most effective financial intervention ever measured was not teaching people more. It was changing which box was ticked by default.
Behaviour · Saving and debt3 citations, 3 caveats
Costs and taxes
The returns you control with certainty.
Fees are the most reliable predictor of returns you control
strongA one percentage point difference in annual cost compounds into roughly a fifth of a portfolio's final value over a working life. It is the one input that is known in advance.
Investing3 citations, 3 caveats
Most active funds underperform, and past winners rarely repeat
strongThe question is not whether skilled managers exist. It is whether you can identify them in advance, and whether their skill exceeds their fee. The evidence on both is discouraging.
Investing2 citations, 3 caveats
Tax drag is a fee you can often remove entirely
strongSame fund, same risk, higher net return. It is the closest thing to a free lunch in personal investing, and it is bounded only by contribution limits.
Taxes2 citations, 4 caveats
Traditional versus Roth is one comparison of two tax rates
strongDeduct at the higher rate, pay at the lower one. That is the whole decision. The tax-free growth story that usually sells Roth is quoting one half of a fraction.
Taxes · Retirement2 citations, 4 caveats
Which account holds which asset changes your return without changing your risk
moderateSame funds, same allocation, different envelopes. It is one of the few remaining decisions that raises net return without taking on more risk.
Taxes · Investing2 citations, 4 caveats
Allocation
What to own, and why diversification is not optional.
Most individual stocks lose money; a few pay for everything
strongPositive market returns coexist with most individual stocks losing money, because returns are extremely skewed. This is the strongest argument for owning the whole market rather than a selection of it.
Diversification · Investing2 citations, 3 caveats
Building a plan on US returns is a bet, not a neutral assumption
moderateNearly every retirement calculator, including the historical simulator on this site, runs on US data. That is a choice with consequences worth naming.
Diversification · Markets and macro2 citations, 3 caveats
Rebalancing controls risk; it is not a source of return
moderateLeft alone, a 60/40 portfolio becomes an 80/20 portfolio during a long bull market — right before it matters. Rebalancing fixes that. The return effect is close to noise.
Diversification · Investing2 citations, 4 caveats
Factor premia are real in the sample and fragile out of it
contestedThe academic finding is robust. The investable product is a different question, and the honest answer is that expected excess return here is smaller and less certain than it is usually sold as.
Investing · Diversification3 citations, 4 caveats
A house is a good asset for reasons that have little to do with price growth
moderateHousing is a competitive long-run asset in the data. Almost none of that comes from the number people quote — what their house sold for versus what they paid.
Diversification · Markets and macro · Saving and debt2 citations, 4 caveats
Stocks are a bad short-run inflation hedge and the best long-run one
moderateThe claim that stocks hedge inflation is true on the timescale of a working life and false on the timescale of a news cycle. 2022 was the second case.
Markets and macro · Retirement2 citations, 4 caveats
Company stock in your 401(k) doubles a bet you have already made
strongIf the firm fails you lose the job and the savings in the same month. That correlation is the entire argument, and it does not depend on the company being a bad one.
Diversification · Behaviour2 citations, 4 caveats
Behaviour
The gap between what portfolios return and what investors earn.
Investors underperform the funds they own
strongThe gap between fund returns and investor returns is the cost of decisions. It is the largest avoidable drag most people face after fees.
Behaviour · Investing3 citations, 3 caveats
Market timing requires being right twice, and the good days cluster in the bad times
moderateThe familiar statistic is true but incomplete. The real argument against timing is not that returns concentrate — it is that exiting and re-entering are two separate correct calls, and the second is the one nobody makes.
Behaviour · Markets and macro2 citations, 3 caveats
Investing a windfall at once usually wins, but averaging in buys something real
strongAveraging in is not a return strategy — it is regret insurance, and this calculator prices the premium so you can decide whether it is worth paying.
Behaviour · Investing2 citations, 3 caveats
Losses hurt about twice as much as equivalent gains feel good
strongThis asymmetry explains why people hold losers, sell winners, and check portfolios more often than is good for them.
Behaviour2 citations, 3 caveats
Drawdown
Turning a portfolio back into an income.
The 4% rule is a historical result with three heavy assumptions
moderateThe rule is a useful anchor and a poor plan. Its three assumptions — 30 years, US returns, zero fees — each push the safe rate down when relaxed.
Retirement2 citations, 3 caveats
The order of returns decides retirements that averages cannot explain
strongWhile you are contributing, a crash is a discount. Once you are withdrawing, it is permanent damage. The same volatility flips sign at retirement.
Retirement · Markets and macro2 citations, 3 caveats
Delaying Social Security is the cheapest longevity insurance available
moderateBenefits rise about 8% for each year of deferral past full retirement age, and the increase is inflation-indexed and paid for life. Nothing sold commercially matches those terms.
Retirement2 citations, 4 caveats
Mortality pooling raises safe income, and almost nobody buys it
moderateA withdrawal rule has to be safe for the longest life you might have. An annuity only has to be safe for the average, because the people who die early fund the people who do not.
Retirement · Behaviour3 citations, 4 caveats
Planning to life expectancy is planning to run out half the time
strongA 65-year-old couple's planning horizon is not the average lifespan of a 65-year-old. It is how long the second of them lives, and that is a much longer number than most plans use.
Retirement2 citations, 4 caveats
A withdrawal rule that adjusts can start higher than one that cannot
moderateThe 4% rule's rigidity is a modelling convenience, not a description of anyone. Retirees who cut spending after bad years can start meaningfully higher — if they really do cut.
Retirement2 citations, 4 caveats