The Investment Scientist

Archive for June 2022

Today I had a very productive meeting with a long-time client of mine. At the end of the meeting, I mentioned that he appeared to have lost quite a bit of weight and he went on to tell me that through diet, exercise and some medications, he was able to reverse his diabetes. I am so happy for him! He is truly making the best investment in his life!

Did you know that Warren Buffet made 99% of his $90b wealth after he turned 50? To be more exact, he did it after he turned 54. Now he is 91. So how did he do that? After all, he is such a boring investor! He missed the best moment to get into AAPL. To this day, he is still not invested in TSLA and he totally doesn’t understand Bitcoin. In his entire investment career, he has rarely had a blockbuster win. So how on earth did he accumulate so much wealth? One often-overlooked reason is that he has lived a very long life.

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I learned this “Quantity of Money” equation during my Oxford program and it has greatly helped me understand Fed’s actions and their implications.

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It appears to me that in times of great uncertainty, people want me (a financial advisor) to know where the market is heading the most. Certainly, I have my informed opinions, bringing all my education and experiences to bear. But I often find myself having to explain that I can’t see into the future and tell them exactly what the market is going to do, all I can provide is informed guesses, and long-term investment success should not depend on guesses, informed or otherwise.

Today, let’s do a mental exercise: imagine I can actually accurately predict the market. If an ordinary person had $10,000 to invest in the S&P 500 index on 1/1/2000, by the close of the market yesterday his investment would have grown to $45,320. Not too bad!

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Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.


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