This website is based on the Zen principles of Truth, Clarity, and Simplicity. Everything that you see here is based on my own personal experience, gained through 25 years as a professional trader, hedge fund manager, and personal investment coach. I have no hidden agenda, and as a consequence, I have no need to ‘spin’ the truth. I don’t have an investment to sell you. I don’t want to gather your assets or manage your account. I don’t need to impress you. I just want to help you to become a better investor. Does that sound a little sketchy?
Don’t get me wrong- I’m not doing this out of pure altruism. The deal is, if you like what you see and want to make an investment in improving your skills, I would like you to take the next step and sign up for a premium subscription. This is not a non-profit enterprise with an all-volunteer staff. Just like you, I need to feed my family. (Actually, our corporate charter mandates that 10% of our profits go to financial literacy programs in our local community.)
At the core of The Zen Investor lies a simple idea. There is too much information available from too many sources, and it is nearly impossible for a trained professional to make sense of it all, let alone an amateur investor doing it in his or her spare time. The investment game is not well-suited for do-it-yourself-ers. The only thing that keeps me from recommending that you should turn your money over to a professional advisor is that most advisors are accomplished at the wrong skill. The way the system works is the people who are best at gathering assets and opening accounts make the most money. Unless you are very good at evaluating the core competency of a prospective advisor, you will have to rely on blind luck in order to get connected with someone who is truly skilled.
In this article we will introduce the core concepts that make up our model portfolios. We will show you, using historical data on stock and bond prices, what the results have been for various investment plans. The first plan we will discuss is a simple “buy-and-hold” strategy. According to this strategy, the investor need only make 3 decisions. First, how much money will he or she contribute to the portfolio. Second, how will the investor allocate the money among broad asset classes, like stocks, bonds, and cash. Third, when will the investor switch from putting money into the account, to taking money out.
The Zen Investor advocates an investment approach that is driven by asset allocation, rather than stock selection, manager selection, style or size considerations, or any of the myriad investing “themes” that are touted by the financial services industry. At The Zen Investor we stress “blocking and tackling” and strive to ignore investing fads and common mistakes such as chasing yesterday’s winners.
Before we get started with our model portfolios, a few definitions are in order.
WALL STREET, n. A symbol for sin for every devil to rebuke. That Wall Street is a den of thieves is a belief that serves every unsuccessful thief in place of a hope in Heaven. Even the great and good Andrew Carnegie has made his profession of faith in the matter.
Is volatility the same as risk?
There have been many scholarly papers written about the nature of risk in the world of investing. One common belief is that risk is the uncertainty of returns over various time periods. The Zen Investor takes exception with this notion, and we will endeavor to make our case.
Volatility refers to the swings in the value of an asset over a specified time frame. Consider a stock, ABC Corp, which is priced at $10 today, increases to $20 one month from now, and subsequently declines to $10 the following month. How risky is this stock?
According to those who equate volatility with risk, this is an extremely volatile stock. But to the investor, this stock is worth exactly the same today as it was when it was bought 2 months ago.