MZ Capital Management
Michael Zhuang is founder and principal of MZ Capital, a fee-only registered investment advisor firm located in the Greater Washington D.C. metropolitan area.
Michael earned dual Master Degrees in Mathematics and Quantitative Finance from Carnegie Mellon University. He was also a PhD candidate for Financial Economics. After completing all training and exams, he decided his true calling is not in academia. The PhD training taught him how to think rigorously and research thoroughly.
From 1999 to 2000, Michael worked as a financial engineer for Societe Generale, the biggest French banking group.
From 2000 to 2003, Michael was hired by PG&E National Energy Group to launch their weather derivatives trading business. Within 2 years, he became one of the top 3 traders in the field. Nevertheless, he saw first hand the crooked ways of the financial industry where everything goes to make a buck. That experience motivated him to launch MZ Capital.
Michael's investment approach is based on the Nobel Prize winning research of Eugene Fama. He is also deeply influenced by three people: Warren Buffet on value-orientation and patience, David Swensen on multi-asset-class investing and decision framework, and John Bogle on minimization of costs for clients and stewardship of clients' money.
Michael is active in the community. He twice sponsored Melodic Impact, a musical fundraiser for kids with cancer. He volunteered as an instructor for Toastmasters International's Youth Leadership Program. He was on the board of Special Love, Inc., a non-profit devoted to kids suffering from cancer. Recently, he also completed Leadership Montgomery.
Michael is married with two children. His favorite past time is stand-up comedy and storytelling. He was nominated as Top Ten Storytellers in Virginia. He has also won multiple Story League contests in DC and Best Storyteller in Philadelphia's Story Slam. He performed clean comedy regularly in corporate, charity and association events.
MS, Finance and Economics, Carnegie Mellon University
MZ Capital Management Story and Value
The answer is yes. Once you do that, don't regret it even if the price goes back up since you couldn't possibly know in advance. More important than taking advantage of the tax code is to learn that it is exceedingly difficult to pick a stock and beat the market. There is a mountain of evidence that stock pickers by and large don't outperform that market, for instance, Berkley professor Terry Odean's many studies on stock picking and market timing, one of which is call "Trading is hazardous to your wealth." Even professional stock pickers (money managers) can't consistently beat the market. It's therefore a fool's errand. It is much better to invest in an index fund and forget about it. Professor Terry Odean also found found investors tend to sell winners too soon and hold losers too long. I suggest you study his research and try to avoid the behavioral biases he identifies that have hurt investors.
The safest way to invest in high-yielding dividend stocks is to use the index approach. There is a fund company that specializes in that, its name is Wisdom Tree.
Take for example one of its ETFs called DHS, or Wisdom Tree high dividend fund, it invests in the 30% of companies that pay the highest dividend yields and it uses a fundamental weighting approach. The weight of a particular stock in the fund is determined by its dividend yield, not its market cap.
High dividend stocks are extremely volatile during a prolonged bear market. I did a study in which I held a portfolio of top 30% high dividend yield stocks during the Great Depression, when the market dropped 86%. This portfolio recovered in 3 and half years while the overall market did not recover until 12 years later. See a summary of study here:
In any given years, there are always some funds that perform better than the index. Are they just lucky or the managers truly have skills to beat the market? Study after study have showed that it is mostly due to luck. Since there are so many funds in the world, there bound to be some that will beat that market.
A good analogy would be a stadium full of people tossing coins. After the first coin toss, heads remain standing, tails sit down. About half will remain standing. After the second coin toss, head remain standing, tails sit down. About a quarter will remain standing. So on and so forth. After the tenth coin toss, odds have it that there are five people remain standing. They have consecutively tossed head ten times. Are they expert coin tossers? They are not. If you try another round of ten coin tosses, they could sit down very quickly.
The same logic applies to outperforming funds.
I am a financial advisier, so my answer maybe partial. I think you will almost surely be better off doing a two fund portfolio of 50% total stock market index fund and 50% total bond market index fund than hiring a financial adviser to pick stocks and bonds for you. Harry Markowitz, the Nobel Prize winner who invented modern portfolio theory, did just that. 99.9% of financial advisers can not beat the market. Stock picking is a fool errand. Don't spend money to hire someone to do a fool's errand. On top of that 99% of financial advisers have conflict of interest. That's the way it is in this country, they are registered broker, they are under no obligation to put your interest first.
In short, hedge funds and private equity funds are both private investment vehicles that are, by and large, exempt from SEC regulation. Therefore they can invest in whatever they want and in whatever manners they want, but they can't advertise.
The difference is that a hedge fund typically uses a certain trading rule to earn excess returns in the securities market, while a private equity fund acquires businesses. A hedge fund manager is not actively involved with the stocks he acquired, but a private equity manager is almost always actively involved in the businesses he acquired.
My company, MZ Capital Management, was started as a hedge fund to take advantage of a new new rule in the Sarbane Oxley Act. The Act requires company insiders to report their insider trades to the SEC within one day of their trades. I created a program to query the SEC database in real time so that I got the insider trading information faster than the market. I was able to make great money in about a year until the market caught up - other traders began to do what I did.
A good example of a private equity fund is Warren Buffet's Berkshire Hathaway.
Hedge funds and private equity funds are not for average investors. I explain why in this article: https://investment-fiduciary.com/2016/10/03/the-massacre-of-hedge-fund-business/