From Research March 2005:

Yes, He Can!
by Jane Wollman Rusoff

Lots of folks head for Hollywood hoping to be the next hot screenwriter. Most are just cruisin' for a bruisin', and they're a dime a dozen. But one only, in surrendering the dream, has become a Registered Investment Advisor and author of finance books with Ben Stein, the writer-humorist-actor.

Say hello to Philip DeMuth, Ph.D. He used to be a psychotherapist in Cleveland. Now he's principal of Conservative Wealth Management, a two- year-old Los Angeles R.I.A. to high net worth individuals. The newest Stein-DeMuth work is "Yes, You Can Be A Successful Income Investor" (New Beginnings Press), due this spring.

"Yes, You Can Time the Market" (John Wiley) was their first collaboration, published two years ago. Versatile, studious Stein is famed for being a Richard Nixon speechwriter and hosting the Comedy Central TV quiz show, "Win Ben Stein's Money."DeMuth manages Ben Stein's money. And he offers the same services to other investors, "smart people," he notes, "who could probably do it very well on their own if they wanted to take the time to really study the financial markets."

That would-be screenwriting career? DeMuth sold a few scripts, but none has been produced. One action-adventure, obviously penned pre 9/11, features an airplane flying into the White House. "I don't think they're going to make a movie of that any time soon. Regardless, screenwriting is a terrible business. I wouldn't recommend it to anyone. The segue into financial writing was a welcome escape," says the cerebral, conservative advisor, 54.

As a shrink, DeMuth's specialty was behavioral medicine. Now he's focused on investor behavior, that of seniors particularly. In the income-oriented book — for those seeking maximum yield from savings he and Stein serve up advice on how to fashion high-income stock portfolios.

"There's a sea change coming in people's investment approach: During the ‘90s, everyone wanted to buy a stock that went up, up, up to the moon. Now people on the cusp of retirement can't identify stocks like that because they don't seem to exist," he says. "They're looking for a way to invest their money so that it provides a steady stream of income from their brokerage account to their bank account."
DeMuth and Stein preach the gospel of diversification; and in the income book, they name company names. But "we point out that any buy-list of stocks has the shelf-life of an egg-salad sandwich. So readers need to do their homework. However," says DeMuth, "I looked at our list the other day, and there's nothing I'd change so far. So I'm glad I won't instantly get a whipped-cream pie in the face."

He's just as specific and direct discussing the financial services industry as his investment philosophy: overweight value and small-cap stocks; diversify widely into emerging markets, commodities and real estate, among other asset classes.

As for Wall Street, he brands it "a school with an expensive tuition. By the time you look at all the different ways makes money off investors or makes poor investment choices on their behalf, it seems to subtract substantially from the returns that ordinary investors could get just by using simple index funds." His own company's Website (www.philipdemuth.com) trumpets: "None of the usual Wall Street monkeyshines."

DeMuth holds that financial advisors would be of greater value to clients if they'd concentrate more on diversification. "They place too much emphasis on individual stock picking -- the hot hand on the part of some guru who runs a mutual fund or picks individual stocks. This hasn't been shown to be a strategy that pays off for investors. They always end up picking companies that regress toward the mean. People are better off accepting the money that's there to be made from the normal operation of the markets."

Born on Chicago's North Shore to the owner of a small steel manufacturing company, DeMuth was valedictorian of his 1972 class at the University of California at Santa Barbara and earned his Ph.D. in clinical psychology at Santa Barbara's Fielding Graduate University. He then opened a private practice in Cleveland affiliated with the Mt. Sinai Medical Center there. Noting, with some chagrin, that he was making more money investing — on his own — than from therapy, he felt a strong need to "reprioritize" his time. That meant a 1995 move to LalaLand to write pictures.

Eventually he realized that to more completely manage his investments, he needed to become an R.I.A. and in 2003 became appropriately licensed. This was the same year he and Stein, son of American Enterprise Institute economist Herbert Stein, published "Yes, You Can Time the Market." By then, Ben and Phil had become great pals, having met shortly after DeMuth's L.A. arrival.

"Ben suggested that we ought to write a book of our lunch-table conversations about valuing the market," DeMuth recalls. In their co-authorship, "Ben is the big idea man; I'm probably a little more of a research assistant. We both write."

Last summer, the team diversified and brought out "Can America Survive? The Rage of the Left, The Truth and What to Do About It?" Now they've finished another financial tome, this one — "Yes, You Can Still Retire in Comfort" — written for the broad market and scheduled for fall release.

Once again, the "Yes, you can" will be rooted in careful risk management. "Look at the telecom Internet bubble:
People cast aside every notion of risk and just ignored earnings. Then the whole thing imploded. If you have a big loss early on in retirement," warns DeMuth, "it's very difficult to climb out. You're much better off having a portfolio that just chugs along modestly and doesn't fall into a big pothole."