Welcome to The Zen Investor

The Zen Investor is designed to help you, the individual investor, do better in the market.  We use a simple and straightforward approach.  You'll find that we present a simple, clear, and truthful picture of what's going on in the stock market.  Our education module shows you how to recognize what's relevant, and what's just noise.  Most of what's written and said about the markets (90% +) is noise.  We show you how to focus on the 10% of stock market information that actually impacts your financial future.

There is no shortage of 'expert' opinions about what's happening in the global financial markets.  What we have found through experience is that there really is no such thing as an expert opinion.  There is just opinion.  We will show you how to distinguish between opinion and fact.  If this is all you get out of your time with us, your time will have been well spent.

At Zen Investor, we approach investing from the perspective of a coach.  Rather than guessing which stocks will go up and which ones will go down (an impossible task, by the way), a coach focuses on developing the skills necessary to succeed at the task of investing.  A coach doesn't depend on commissions, fees, or sponsorships.  A coach is only interested in results.  Our particular brand of coaching is based on experience, rather than on academic theory.  We coach what we know to be true, and what has proven over time to be effective.  We focus on basic investing skills, like how to write an investment plan, how to determine which information is relevant to the market, and how to measure the risks of different investments. 

We present our assessment of the economic and investment environment in a way that is based on factual data that you can verify.  In this way, you will not have to wonder whether or not our version of reality is accurate.  For samples of our work, please feel free to browse the site.

The Big Lie

Stock brokers, investment advisors, and fund managers are asset-gathering machines.  They earn their pay by bringing in new accounts, and keeping those accounts under their control for as long as possible.  Performance - how well the account actually does - is at best a secondary consideration in this process.  In order to gather and keep control of assets, these firms have become quite good at spinning what I call 'The Big Lie,' which is that they can predict the future.  I'm not saying that all financial professionals are dishonest people.  On the contrary, I was in the business myself for 30 years, and I worked with some of the smartest, most hard-working and honest people I've ever known.  The problem is that the reward system is all wrong. 

Commissions and Fees

Brokers, advisors, and fund managers earn their money through commissions and management fees.  There's nothing wrong with that, per se.  But the way these costs are calculated is a problem, unless your account is large enough to allow you to negotiate the fees you pay.  For most investors, the costs of investing are quite high, especially when you consider what you are getting for your money.  At the low end, you could have an account with a discount broker, and pay $7 or $8 per trade.  If you invest only in index funds, which mirror the performance of the stock market as a whole, you will pay an annual management fee of about one-half of one percent, plus 12b-1 fees of another one-half percent.  What's so bad about paying 1% in annual fees you ask?  The long-term average real return of the stock market is about 7%.  If you pay 1% for the privelege of playing the game, you're giving up more than 14% of your expected rate of return.  That seems excessive to me. 


The Truth

Study after study shows that most professional fund managers do not beat the market.  While it's true that there are always a few who do very well, who among us is capable of identifying the next hot manager ahead of time?  Simply investing with the manager who has done well over the last 1, 3, or 5 years is not a good way to approach the selection process.  Hot managers always turn cold eventually, and buying yesterday's winners increases the chance that you are buying near the top of that manager's performance cycle.  The truth is that success in investing is a function of time.  The longer your time horizon, the better your returns can be, and the lower your risk is.  We advocate a low-cost, low-maintenance approach to investing.  We don't react to every zig and zag of the market averages.  We change our models only when there is a shift in the underlying fundamentals of the economy.  Low maintenance means less trading.  Less trading means lower costs.  Lower costs means that you keep more of your profits. 

How It Works

We base our approach to investing on the premise that risk is real, and it can be measured.  Based on the amount of risk in the markets, there are times when you should be sitting on the sidelines, either in a money-market instrument, treasury bonds, treasury bills, or some other relatively safe alternative to stocks.  Our risk level indicator is driven by two components.  The first is a measure of overall market valuation, and the second is our proprietary, GPS-like indicator, which tells us where we are in relation to the business cycle.  Both of these components help us reduce the overall risk of your investments. 

The Model Portfolios

The end result of our work is found in our model portfolios.  This is where we show you how to move from theory to practice.  We use 3 models, based on the amount of time you have before you need to begin spending your savings, and how active you want to be with your investments.  The long-term model is designed for investors who want to 'set it and forget it.'  Adjustments to this model are made quarterly.  The medium-term model is for investors who are more active, willing to take on some additional short-term risk, and want to be more reactive to changes in the economy and the market.  The short-term model is for investors who enjoy the process of investing and don't mind rolling up their sleeves and digging into the shorter-term ebb and flow of the market.  For a more detailed description of how the models work, click here.


What To Do Next

If you are interested in learning more about how The Zen Investor can help you to think and invest for yourself, we invite you to explore our content using the navigation buttons at the top of this page.  For information about what's going on in the Economy and the Markets today, click on those buttons.  For background information on how we arrive at the conclusions we use in our model portfolios, click on Beliefs and Articles, and browse through this information.  And if you are interested in going further, click on Premium to find out what we have to offer to our paid subscribers.