Dilbert's' 9-point financial plan worthy of economics Nobel

OK, so Dilbert didn't win the Nobel Prize in economics this year.

Fortunately for America's 95 million investors, Adams' secret nine-point
formula was finally revealed in "Dilbert and the Way of the Weasels." Notice its
simple brilliance in the exact reproduction of his formula:

• 1. Make a will
  
• 2. Pay off your credit cards
  
• 3. Get term life insurance if you have a family to support
  
• 4. Fund your 401k to the maximum
  
• 5. Fund your IRA to the maximum
  
• 6. Buy a house if you want to live in a house and can
  afford it
  
• 7. Put six months worth of expenses in a money-market
  account
  
• 8. Take whatever money is left over and invest 70% in a
  stock index fund and 30% in a bond fund through any discount broker and never
  touch it until retirement
  
• 9. If any of this confuses you, or you have something
  special going on (retirement, college planning, tax issues), hire a fee-based
  financial planner, not one who charges a percentage of your portfolio

We know creativity and science share much in common. Both science and art begin with what-ifs, unproven ideas about unknown realities, dreams of the future before it unfolds. And often all it takes is a small, simple "key" such as "E=mc2" to unlock the door.

In fact, we saw proof last week as Nobel prizes were awarded for simple dreams unlocking great truths: in physics, revelations about cosmic radiation before the Big Bang; in medicine, the genetic flow of information; in chemistry, cell production of proteins.

This year, we were rooting for Adams. His simple formula reminds us of how, after being awarded the Nobel Prize, Albert Einstein spent his entire life searching for the "Unified Theory of Everything." It eluded him. Adams, on the other hand, did discover a "Unified Theory of Everything Financial," which deserves a prize.

Adams' formula was originally published in "Dilbert and the Way of the Weasels" at virtually the same time Princeton psychologist Daniel Kahneman was awarded the 2002 Nobel Prize. You will recall that Kahneman destroyed Wall Street's historic theory of the "rational investor." Dilbert made a complementary discovery, defining a weasel as "anyone trying to get away with something," thus explaining two centuries of psychological behavior on Wall Street where weasels have been misleading Americans with the false theory that investors are rational.

'Unified Theory of Everything Financial'

Quietly hidden in Adams' groundbreaking work is a financial formula so simple it rivals Einstein's E=mc2. In its original form Adams' formula was apparently so heretical and so explosive that no major house would touch it when he proposed publishing it as a one-page book. After initial rejections, he announced sadly that "if God materialized on earth and wrote the secret of the universe on one page, he wouldn't be able to find a publisher" either.

Adams boldly states that this is "everything you need to know about personal investing." In just 129 words, nine simple points, one page you have the unabridged "Unified Theory of Everything Financial."

That's it. Everything!

Thanks to Adams' formula, the average irrational investor can ignore Wall Street: "Everything else you may want to do with your money is a bad idea compared to what's on my one-page summary. You want an annuity? It's worse. You want a whole life insurance policy? It's worse. You want to invest in individual stocks? It's worse. You want a managed mutual fund instead of an index fund? It's worse. I could go on, but you get the point."

Check the bottom line: A portfolio with an asset allocation of 70% in Vanguard's Total Stock Market Index and 30% in the Total Bond Market Fund is doing just fine, performing remarkably close to the S&P 500 index. Moreover, that simple two-fund portfolio is perfect for the vast majority of America's 95 million investors who are passive much as Adam's Dilbert character.

The truth is, most investors have little or no interest in Wall Street's casino action; all the time-consuming research, the sophisticated stock-picking tricks, the costly trading necessary to play in a market drowning in 10,000 stocks, 18,000 funds and more than 100,000 bonds. Most investors have jobs and kids as their top priority. Moreover, Dilbert's simple two-fund portfolio compares favorably with our other lazy portfolios.

Prize winners in parallel worlds

Folks, before you dismiss the idea of Adams winning the Nobel Prize in economics, please remember, there is precedent: Back in 2002 the Nobel committee ignored the usual suspects and picked a psychologist. So there's hope that sometime in the future a brilliant humorist can also one-up all the pedigreed pundits in this "dismal science." Adams predicted that "someday an economist will win the Nobel Prize for discovering the exact dollar-per-weasel equation that explains our world." But it's now obvious that he's already done much more! Adam's formula would eliminate thousands of weasels from Wall Street, vastly improving the efficiency of America's financial markets, while his "Unified Theory" would improve the wealth-building power of all investors.

If you want more information on how you and your kids can win the prize, please read 1989 winner Michael Bishop's "How to Win the Nobel Prize." The good doctor innocently calls himself an "accidental scientist." Also read "The Beginner's Guide to Winning the Nobel Prize" by 1996 winner Peter Doherty, an Australian veterinarian who says the winners come rather unpredictably from "unlikely backgrounds, one-room schoolhouses and concentration camps," yet all have one thing in common, a "fire in the belly."

One final word: Remember that we all live in parallel worlds -- in politics and religion, in art and science, in our dreams and in reality -- where nothing is ever impossible, where you can achieve your wildest dreams, where your investments succeed simply by using simple formulas and by living with "fire-in-your-belly."

By Paul B. Farrell, MarketWatch here