(originally published 4/12/2016 on my personal LinkedIn page)

A young but earnest Zen student approached his teacher, and asked the Zen Master:

“If I work very hard and diligently how long will it take for me to find Zen?”

The Master thought about this, then replied, “Ten years.”

The student then said, “But what if I work very very hard and really apply myself to learn quickly…How long then?”

Replied the Master, “Well, twenty years.”

“But, if I really, really work at it?” asked the student.

“Thirty years.”

There is a good reason why stories like the one above have been shared for hundreds of years and continue to be told today.  The stories contain valuable lessons about avoiding commonly made mistakes, and the stories will be told so long as the mistakes continue to be common.

While it may be rare for any of us to see a young student approach a Zen Master for advice today, it is not hard to find a person of any age engage in well-intentioned behaviors that impede their own success.  Like an adventurer struggling to escape quicksand, anxiety and over activity can sometimes make our desired outcome move further and further out of our reach.

In the world of investing, an investor’s constant adjustments to a portfolio (often an emotional response to a perceived “pattern” in the market) frequently results in a lower return than if they had never made a change at all.  A term has been popularized to describe the damage that we do to ourselves through our own attempts to fight our way to our financial goals.  This self-induced injury is referred to as the “Behavior Gap”.  The reported cost of the average investor’s own misbehavior varies depending on which study you read.  The popular DALBAR “Quantitative Analysis of Investor Behavior” indicates that an investor may have cost themselves 4.32% per year over the 20 year period ending in 2011!

Let’s assume that people aren’t doing themselves quite so much harm.   A Cass Business school study, using a different methodology, found a 1.2% annual behavior gap over the 20 years ending 2013.  This may not sound like much at first, but on a million dollar portfolio that small gap would have left a more “Zen” investor with a portfolio $940,000 larger than the average equity investor who moved in-and-out of funds.

While we can’t overlook the positive results of the hard work involved in earning money, once a sound financial plan is made and an investment plan is implemented, there is value to be found in a calm and patient outlook.  A disciplined approach to following an intelligent path can yield a much better result than a frantic attempt to grab any perceived short-term opportunity. 

It may not be necessary to look centuries into the past, or across an ocean to find a role model for effective Zen investing.  As such, I will close with some timeless wisdom from the exotic land of Nebraska: