November 16, 2007 – The other day, Kaeho and I were discussing an article we both read entitled “What if Buddha Dated?” and both agreed that “What if Buddha Invested?” would make a great topic for the casual Friday blog entry. However, I decided to hand the duty of this blog to Kaeho. After you read my short story below, you’ll understand why.
I remember years ago watching the movie Ghandi about the king of non-violent change, Mahatma Ghandi, starring Ben Kingsley. There was a scene in which Indian practitioners of non-violence, and followers of Ghandi’s teachings, were being viciously struck down by their British occupiers, each moving forward unflinchingly and fearlessly into an onslaught of blows by wooden canes, but serving up not a single retaliatory blow or a single act of resistance.
When I watched that scene, I was infuriated almost as much by the non-retaliatory stance of Ghandi’s followers as I was by the brutal actions of the British occupiers. It’s not just in my constitution to be so conciliatory in the face of such brutality. I, for one, would react more like the biblical Samson did against the Philistines, or as did the national Scottish hero William Wallace against the occupying British. After all, martial arts are so-named because they are “martial”. However, I also know that there is great power in Ghandi’s non-violent teachings as they ultimately succeeded in expelling the British from India. But now you should understand why I am handing this week’s blog entry over to my colleague Kaeho. So enjoy this week’s casual Friday blog.
Given the non-attachment to materialism that Buddhism preaches, it may be strange to think that Buddhist principles can lead to better principles of wealth building but selflessness and a detachment from the emotional aspect of building wealth, particularly the emotion of greed, can contribute to a marked improvement in one’s ability to build wealth.
If Buddha Was a Stock Picker
Approaching relationships with a Buddhist mentality, one would not enter a relationship by assigning false hopes or delusional characteristics of glowing positivity to a potential partner. Furthermore, one would not become excessively attached to your partner, feeling a compulsive need to call or text message him or her every single hour of the waking day. If Buddha invested, he would also apply these same principles to choosing stocks. He would not assign numerous positive qualities to a stock from a single glowing TV report or newspaper article without truly digging deep to confirm that such a positive view was well justified. Furthermore, Buddha would never become enamored with a stock and hold on to a stock if it lost 25% of its value, convinced that it would come back. Instead Buddha, due to his credo of non-attachment to material things, would set the stock free and let it go once it had reached a certain stop-loss limit.
If Buddha Searched for a Financial Consultant
The Dalai Lama says, “If you want to be wisely selfish, care for others.” In martial arts, my first instructor, Sensei Dukes, told me that he could teach me to lose all fear, even fear of dying. He told me that all fear was rooted in ego, and that if you learn to let go of ego, all fear disappears. In relationships, all jealousy originates from ego. On the other hand, happiness originates out of selflessness. If Buddha were to invest and turn his money over to a financial consultant, Buddha no doubt would eliminate all persons that he even suspected of suffering from the vice of greed. If Buddha suspected that a consultant would fully invest all of his money when dollar cost averaging into the market would make more sense due to uncertain market conditions, Buddha would eliminate this person from consideration.
If Buddha encountered a financial consultant full of braggadocio without a healthy dose of humility as part of his or her constitution, he would eliminate this person from consideration as well, realizing that such an extreme ego would lead to selfish decisions that were not in his best interest. If Buddha believed that the financial consultant was not selfless, but instead a “company” man or woman that would tow the company line to satisfy his or her boss rather than make the best possible decision for his investments, Buddha would also eliminate this person from consideration.
In fact, Buddha would probably ask the financial consultant if he or she was invested in the exact same assets that he or she was recommending for him. If the answer was no, Buddha would be skeptical. If the answer was yes, Buddha wouldn’t necessarily be convinced that he had found a winner, but it would be a start.
If Buddha Ran an Investment Firm
Let’s return to the concept of “non-attachment” for a second. Non-attachment in communication manifests itself in honesty. During conflict resolution, an adherence to non attachment manifests itself in the deliverance of “I” statements rather than accusatory statements. Two of the main selling strategies of investment firms is utilizing the powerful emotions of fear and greed.
Fear is utilized by selling people on the fact that diversification is the best risk-reward setup for you the client. In reality, diversification is the lowest common denominator strategy that allows all firm consultants to allocate your money in the least amount of time to produce mediocre returns just good enough so you won’t leave but yet free up the most time for consultants to gather more assets for the firm.
Firms further utilize fear when “selling” clients on the necessity of diversification by leading clients to believe that more highly concentrated positions in fewer asset classes or fewer countries exposes clients to higher risk and thus higher possibilities of losses. Again, this is not true. More highly concentrated positions in fewer asset classes and fewer countries will lead to much greater returns if performed thoughtfully and with insight. However, this process requires time, and time is a commodity that acts as the enemy when the goal is to maximize the amount of assets gathered and thus, the amount of fees that can be charged. What reduces the amount of time needed to allocate your portfolio, but also returns? The theory of diversification.
If Buddha ran an investment firm, he would never use the fear and greed-driven Modern Portfolio Theory of diversification to manage a single client’s assets.
Greed is utilized by convincing clients to place their money in higher risk but higher-commission or higher-fee products with the hope of quick, easy returns. If Buddha ran an investment firm, he would invest in the exact same assets that he would purchase for his clients.
If Buddha Wanted to Build Wealth
If Buddha dated, Buddha would probably not subscribe to the Jerry Maguire mantra of “you complete me”. Instead, just as every martial artist knows that only he or she can defeat him or herself, Buddha would probably work on improving himself first, knowing that such self-improvement would attract the perfect partner and save him many hours or years of searching. Likewise, if Buddha was an investor, he would no doubt desire to learn to invest himself instead of just handing his hard-earned millions over to a financial consultant, the overwhelming majority that have their selfish interests at heart versus the interests of the investor.
Buddha the investor would realize that there is no easy-way to build wealth, and that the easy path to investing, i.e. handing your money over to someone else, is often the path that will cause the most mistakes and grief. After all, if that average financial consultant has at a minimum, 100 clients, how many hours of personalized attention can your portfolio possibly receive?
Buddha would realize that with a million dollar account, if managing his own account would yield $150,000 more a year than handing it to someone else, and that the effort required to do so would be one hour per day Monday through Friday, or 260 hours a year, that this time commitment would be tiny on the effort-reward scale. Unless Buddha’s job paid him more than $576 an hour, the effort required for self-improvement in the investment knowledge arena would most definitely be worth the returns and rewards.
Maholo,
Kaeho
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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 return high double-digit and triple-digit returns.
