Evidence library
Every claim, with its sources and its limits
16 notes drawing on 29 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.
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.
1 citation · 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.
1 citation · 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.
2 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.
3 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.
2 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.
2 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.
1 citation · 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.
2 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.
2 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.
1 citation · 3 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.
3 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.
2 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.
2 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.
2 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.
2 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.
1 citation · 3 caveats