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Driven by Rules, Not Emotion
Empirical utilizes our proprietary Rules Based Investing® process to completely remove subjective emotional decision making from the investment process.
This is the typical emotional roller coaster that individuals and advisors experience through a market cycle when investing. The key is to maintain a disciplined approach (Rules Based) and stay the course.
A loss is more destructive than a gain is beneficial
After suffering a 50% loss, a 50% return does not get you back to breakeven. It requires a 100% return.
This is the reason Empirical focuses our rules on controlling risk not on chasing returns. It is much more important to protect against big losses rather than achieve big gains.
Ironically, the very act of controlling risk typically leads to better returns.
A highly regarded study led by mathematical psychologist Amos Tversky and Nobel Prize winner Daniel Kahneman found that investors feel the pain of a loss twice as much as the joy of an equivalent gain.
Said another way, fear is twice as powerful as greed. Both are destructive when it comes to investing.
Using proven sets of rules serves to minimize the effects of emotional decision making.
Investors don't dislike risk, they dislike loss which can lead to irrational emotional decisions.