The Investment Scientist

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Equifax, one of the three credit agencies, had their computer system hacked. As a result, 143 million Americans (and some Canadians and Britons) had their sensitive personal information, such as their name, address, birthday, social security number and credit card information compromised. You should assume you are one of the victims and take the following steps to protect yourself:

Step 1: Sign up for

By law, you are entitled to one credit report per year from each  credit agency. Since there are three credit agencies (Equifax, Experian and Transunion), you may stagger your requests and get one credit report every four months. is a website jointly operated by the three credit agencies that provides a centralized location for  requesting your annual free credit reports.

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In December 2016, I wrote about how I came to know a little girl in rural China who suffers from thalassemia and decided to pay for her blood transfusions that cost $150 every 40 days. I called that my best investment in 2016 and I truly felt that way.

Since then, I have sent  $150 to them every month and kept in touch with them on WeChat.

Apparently Jia Jia’s homework essay did not touch only me, it also touched many other people. In the end, they received the equivalent of about $50k in donations.

Grandma took her to the best children’s hospital in Tianjin to seek treatment. One week’s stay there set them back more than $3000 and they decided they couldn’t afford that. So they came back to their town to seek treatment in the provincial hospital.

One day I got an essay from Jia Jia talking about how happy her grandma was, more happy than she had ever seen her. It turns out that Jia Jia needed a bone marrow transplant to cure the disease and a donor had been found.

But there was just a little problem. The provincial hospital had only successfully done bone marrow transplants on adults.

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Spontaneous Broadway is an hour and a half long  musical show broken into two 45-minute sections. In the first half, the audience members are asked to write down made-up song titles and put them a basket. Each actor in the cast will draw one from the basket and, based only on the title, make up a song right on the spot. Afterward, the audience will vote for the song they like the best.

In the second half of the show, the cast will create a Broadway musical that contains the song the audience picked along with many other songs, characters and a story. This, again, is done entirely by improvisation.

Just the thought of this terrifies me. That’s why I flew to San Francisco last week to participate in a workshop put on by Bats Improv Theater. The conclusion of the workshop was a public performance this past Sunday.

Oh boy! Did we (the student cast) did an awesome show?


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Well, two weeks ago I got an email from Investopedia, an encyclopedia website for personal finance and investment. The email told me that I was recognized as one of their “Top 100 Influential Advisors” in their inaugural ranking.

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Let me just say I was very skeptical. I’ve gotten emails like that before, sometimes even from reputable magazines, telling me that I had been selected in their top financial advisor rankings. They then would go on to ask me to buy advertising, or make a payment to retain my listing in their top advisor rankings.

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Investment-Planning_Lump-Sum-vs-Dollar-Cost-Averaging.jpgRecently, I shared a true story in which I set up a client’s 401k plan five years ago with periodic (bi-weekly) contributions and equal investments into both a US stock index fund and an international stock index fund. Despite the fact that the US index (fund) has outperformed the international index (fund) by a huge margin: 86% vs 29% over the last five years, my client now has more money in the international fund than in the US fund. What gives? I invited my readers to think about it and give me their explanations. Now it’s time to reveal the answer: it’s dollar cost averaging!

Let me show you a stylized example in a three time-period world. There are two indexes. Index A goes from 100 to 105, then 110. Index B goes from 100 to 80, then 100. It’s clear that index A dominates index B since the total return of index A is 10%, that of index B is 0%. Yet an investor who makes equal $100 periodic investments in both index A and B will have more money in B at the end. Here is the math …

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If you look at this chart covering the last five years, the red line representing the US market and blue representing international markets, which market do you think would have made you more money? It’s a no brainer right? The US market went up nearly 90%, while the international markets went up less than 30%. Of course it’s the US market, right?


I thought so too until I reviewed a client’s 401k account recently. I set up his account about five years ago. 

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Identity-Theft.gifOne day two years ago, I got an email from a client of mine. In a very concise manner, he told me he was in Singapore for a business deal and he needed to wire $500k from his investment account to a bank account in Singapore.

To raise the money, I would need to sell some of his highly appreciated investments. I didn’t want him to be surprised by capital gain taxes, so I replied with an explanation of the tax implications.

After that, I was ready to wire the money, so I sent him a short message: “You know our standard procedure, any time a client wants to move more than $10k, he needs to call me to tell me in his own voice.” I totally expected my phone would ring right away.

Instead, I got another email: “I am in Singapore, I don’t have a phone with me, take this email as my authorization to wire the money.”

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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]

Twitter: @mzhuang

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