Welcome to The Zen Investor


Buddha once said "Believe nothing, no matter where you read it, or who said it, no matter if I have said it, unless it agrees with your own reason and your own common sense."  That's a powerful statement, and one that we adhere to throughout this website.  There is no shortage of 'expert' opinions about what's happening in the global financial markets.  While there are many skilled and talented financial practitioners out there, the problem most of us have is in distinguishing the good ones from the not-so-good.  We will teach you how to separate fact from fiction, and news from spin.  For our current economic outlook, click on the  Economy tab on the main menu.  For our current outlook for stocks, bonds, and other asset classes, click on the Markets tab.

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 (all stock-picking is guessing), a coach focuses on teaching the specific skills that all investors need in order to make good decisions.  A coach doesn't depend on commissions, management fees, or sponsorships.  A reputable coach is primarily 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 work in the real world.  We focus on basic investing skills, like how to identify your financial and investing goals, how to calculate your risk, and how to set up your personal investment portfolio.

Everywhere I go I get the same questions from investors.  What stocks do I like? What's the stock market going to do next year?  Where's the economy headed?  What do I think about bonds, or oil, or gold?  These are the wrong questions, because they are all based on the false assumption that I, or any experienced professional, can predict the future.  And they're also based on the false premise that I know better than you what you should buy or sell.  Brokers and advisors have no incentive to teach their clients how to invest.  If your financial advisor taught you  how to make your own investment decisions, you would no longer need his services.  It's in the advisor's interest to keep you in the dark, dependent on him to make the decisions for you, and hoping that he has your best interest at heart.  We present our assessment of the economic and investment environment in a way that is based on facts that you can verify.  In this way, you will not have to wonder whether or not our version of reality is accurate.

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 by charging you commissions and management fees.  There's nothing wrong with that, per se.  But the way these costs are calculated is a problem.  If your account is large enough ($1 million or more), you can negotiate with your broker for lower fees.  But for most investors, the fees are quite high, especially when you consider what you are getting for your money.  While big accounts can pay as little as 0.5% of their assets, smaller accounts can pay as much as 3% or 4%.  What's so bad about paying 3% in fees you ask?  Consider that the long-term return on your investments is expected to be about 7% per year.  If you pay 3% to your broker, that means you are only keeping 4% for yourself.  4% return per year will not even cover the cost of inflation, which means that your account is treading water, as opposed to building wealth and purchasing power. 


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 understanding how much risk you are taking is more important than any other factor in investing.  The good news is that risk can be identified and measured.  Based on the amount of risk there is in the economy, there are times when you should be sitting on the sidelines, in riskless assets like treasury bonds or cash.  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 three 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 have at least 15 years until retirement.  Adjustments to this model are made quarterly.  The medium-term model is for investors who have between 7 and 15 years to go.  And the short-term model is for investors who have 7 years or less.  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 subscribers.