The Investment Scientist

Archive for February 2013

How Can I Help?

How Can I Help?

“What makes you smile every day? What fills up your tank?”

These are questions a friend of mine asked me recently. For my wife, it is hosting dinner parties. She loves seeing people come together and enjoys conversations with friends. She does this almost every week now. It is also a great way for me to see her doing the thing she loves.

For me, it is learning improv and performing comedy on stage. English is not my first language, and I never thought I could do that. Now, I regularly go on stage to make people laugh.

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house for sale

House for sale

Recently, a client called to tell me that he had finally got the big boulder off his back, and it was such a relief for him.

The “big boulder” he referred to was his big house, with a swimming pool and a tennis court. The house had been costing him $100k a year in property taxes and upkeep, more than 50% of my client’s retirement income. No wonder he called it a big boulder on his back.

He bought the house 25 years ago for $2.2mm, and he just sold it for $2.1mm. After all the costs associated with selling the house, he took home $2mm and change.

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New York Stock Exchange

New York Stock Exchange

With the market up about 5% in January, a prospective client of mine called to let me know he is not going to invest in stocks at this time – in fact, he is going to pull all of his money out of the market.

This may not be the best course of action for him.

According to research done by Cooper and McConnell, what the market does in January has a strong predictive power for what the market will do for the rest of the year.

Using data since 1940, they found that if the market is up in January, it will rise an additional 14.8% for the rest of the year; if the market is down in January, it will rise only 2.92% for the rest of the year. This gives rise to a spread of almost 12%, a highly statistically significant number.

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Email scam

Email scam

I recently received an email from a client of mine. The mail contained only one line: “What’s the balance of my account?”

“It’s $978k as of close of yesterday,” I replied.

“I need $500k for a business transaction,” my client responded.

I went into an explanation of the tax consequence of selling long-held investments to fund a business transaction, but my client insisted that he needed the money urgently. So I emailed him: “send me your wire instruction, and I will make sure the money will be in your account tomorrow.”

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



You may also get his monthly newsletter, or join his Facebook page for regular wealth management insights. Michael's email is info[at]mzcap.com.

Twitter: @mzhuang

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