Applying Zen to Today’s Stock Market (Part 1 of 2)

“In the Beginner’s Mind there are many possibilities, in the experts mind there are few.”  – Shunryu Suzuki

 

 

 

PART 1 OF A 2 PART BLOG

The Beginner’s Mind is a term often used by martial artists or Zen practicioners.  It refers to a mind that is innocent of preconceptions, expectations, judgements, and prejudices.

If you invest in stocks, bonds and mutual funds, you may find that applying the Beginner’s Mind to investing can improve your results and experience.

First we re-evaluate  stock market expectations and define reality.  Main stream financial media and traditional investment advisors love to preach about long-term investing.  They say things like “stay the course” or “wait it out” or “you’re in it for the long haul.”  Then they pull out their “Stock Market History” charts/graphs and tables and tell you that “since 1926, the stock market has averaged  11% per year, so wait it out and place the averages in your favor.”  The sad thing is that most investors buy into this pile of hay that has been through both ends of the horse.

Let’s apply the Beginner’s Mind to some of this hog-wash and translate the above.  Our translation:  Traditional advisors and main stream media are saying “don’t think, don’t do anything to manage your returns and reduce risk.  Just sit tight, hope you’re Methuselah and going to live 900 years so that you can wait for the long-term averages to settle the score.” 

The reality of the stock market landscape is this.  Ending 09/30/2009, the S&P 500 has a 10 YEAR total or cumulative rate of return of -1.52%!  Furthermore, research from www.crestmontresearch.com traces returns of the Dow Jones Industrial Average (the Dow) back to 1901 (http://www.crestmontresearch.com/pdfs/Stock%20Secular%20Chart.pdf).  What they show is that the stock market moves in Secular Cycles.  Since 1901 to prsent day, there have been 4 Secular Bear Cycles where the average return is a far cry from the 11% per year that the traditional financial advisors tell you to expect. 

• Secular Bear Cycle 1901-1920, 20 years in length, the Dow returned a total return of 2%. 
• Secular Bear Cycle 1929-1941, 12 years in length, the Dow returned -63%. 
• Secular Bear Cycle 1966-1981, 16 years in length, the Dow returned -10%. 
• Secular Bear Cycle 2000 – ?????

The bottom line is this, a retirement crisis looms for boomers, young, and old…..UNLESS one begins applying the Beginner’s Mind to retirement and investment strategies.

PART 2 To be continued next week…..

Best returns,

Matt