20 April 2007 – Today, I’m sitting in for Kaeho, but have decided to keep the Friday theme of Zen and Martial Arts intact. This is perhaps one of the very best times for a blog entry about applying philosophies of Zen and the Art of War to investing. You must avoid the Art of War because investment firms apply the Art of War principles continuously and unyieldingly to get you to hand over more money to them. As such, you must counter and apply Zen philosophies to determine intelligent investment strategies that 99% of other retail investors will not apply.
Consider these Art of War principles: (1) If they are greedy, lure them with goods; (2) Show them a little prospect of gain; then attack and overcome them; and (3) When the enemy is confused, then you can overcome them. All investment firms continuously apply these principles. These principles are the difference between intelligent investors and the great majority of retail investors. Retail investors let themselves be deluded by poor investment strategies of firms that push the majority of risk on to them while allowing firms to minimize their risk. Intelligent investors utilize investment strategies that pushes the majority of risk back on to the market and minimizes their own.
For instance, again, in U.S. and Asian markets (before recent corrections in China, Japan, and India), we were consistently bombarded with headlines from the financial media of record highs and how we are in the midst of raging bull markets, many from employees of investment firms or industry employees, otherwise interpreted as “give us more money now or you will miss out on enormous upside potential.” As I had warned numerous times, caution and waiting for dips to buy was the much better strategy as opposed to blindly following the mainstream advice and jumping on board. One would have been well served to wait for dips in China, Japan and India, and I still maintain that one is best served by waiting in U.S. markets as well.
Currently, I see the most nonsense I have ever seen being reported in the financial media as a result, I presume, of industry salespeople attempting to capitalize on the opportunity to gather more assets from the thundering sheep herd now. So more so now than ever, it is critical for a Zen like state of mind to be applied to investment strategies. It is often said that Zen meditation is of no use if the mind is not clear or empty, that without a correct orientation of the mind, that all Zen practices are in vain. The same is true of investing. If the thundering sheep herd mentality that 99% of retail investors assume, leads them astray, than all investment practices are in vain and will lead to failure instead of wealth. Because there is a mass of misinformation out there, the retail investor must be careful to assume a correct orientation of mind to ensure success in the next year.
As an example of utter nonsense that I have read over the past several weeks, I read one article on a financial news website that stated that China was still a good market to invest in but unfortunately one needs to be much more wary in this very risky market as opposed to the U.S. markets because China, compared to the U.S., is much more politically and economically unstable than the United States. The recent drop this week in Chinese markets, this journalist attested, was proof of the inferior nature of Chinese markets compared to the United States (although the Chinese markets have since rebounded). Another article I encountered stated that now might finally be the time to start looking at the precious metal market segment if you have the stomach for it because of its great risk. Again, these are statements made by people’s ignorance with no semblance to reality.
To address the statement about China, if one would rather struggle to earn 10% in an entire year from investing solely in U.S. markets versus consistently boosting returns of one’s portfolio by earning over 100% gains in Chinese stocks and then experiencing a 10% or so normal pullback in a couple of days, then so be it. Even when these swift and strong corrections happen in emerging markets, if one has any semblance of a sell strategy, it is simple to ensure minimum 85% profits on stocks that are purchased in booming markets. Booming markets, again, are not risky, if intelligent investment strategies are applied. I can only imagine that the person that marked China’s markets as far riskier than those of the U.S. would apply a terrible strategy such as buying Chinese mutual funds, and therefore offer such flawed critiques of the Chinese markets.
Furthermore, to say that a market based upon the worst currency in the world (among developed markets), the U.S. dollar, is economically so much more sound than an Asian market that significantly controls the very fate of the U.S. market (because China owns more than a trillion dollars of dollar-denominated assets), can only be made by a person that is solely interested in selling and not by anyone with even an iota of understanding of the global economy.
Likewise, to say that investing in gold, silver, uranium and so forth is risky is just ignorant and can only be made by someone ignorant of how to make profits in this sector. Even with the current pullback in the precious metal sector, I am still sitting on over 11 stocks with more than 50% gains in less than 9 months, with 8 of these stocks still sitting on more than 70% gains. And I own plenty more that are up more than 30% in the same approximate time period that have nothing to do with the precious metals sector. Furthermore, because most people are extremely skeptical that one can routinely achieve 25% to 30% annual gains, something that I teach people how to do through my online maalamalama course, I plan to post audited statements that prove this on our website within the next couple of months or so to put this skepticism to rest. If it proves difficult to do this due to limitations on the use of audited statements, then at a minimum, I’ll post performance of our global investment newsletter portfolio. Most people are skeptical of what is possible again because they have been misled for decades by the nonsense that masquerades as fact in the investment world.
Again, this happens because they have never learned the proper “orientation of mind to build wealth” so everything they do in an attempt to build wealth is in absolute vain. The precious metal segment certainly is volatile, but how you invest in this segment removes about 80% of the risk associated with the volatility. If you know HOW to invest properly in this segment, it is not risky at all. But of course, knowing how to invest in this segment necessitates an understanding of economics and politics, something that 99% of the people, including all industry insiders responsible for the chatter spread throughout the media, do not have. Gain the proper mind orientation to build wealth, and a whole different world of investing will open up to you — the difference will be so great that when this transformation occurs, you will wonder how you could have invested “blindly” for almost your entire lifetime.
[tags]zen, martial arts, art of war, investment strategies, wealth literacy, how to build wealth[/tags]
J.S. Kim is the founder and Managing Director of maalamalama, a comprehensive online investment course that uses novel, proprietary advanced wealth planning techniques and the long tail of investing to identify low-risk, high-reward investment opportunities that seek to yield 25% or greater annual returns.