Financial Lessons Similar to the Experience of Climbing Mt. Everest

There are books, movies, and even dreams about climbing mountains like Everest -- in nature and in the stock market.

Edmund Hillary is known around the world as the first person to make it 29,035 feet to the top of Mt. Everest in 1953. Reaching the world’s highest peaks, in any industry, obviously makes for the best stories. But, what if it’s not true? Or, more importantly, what is a longer-lasting lesson?

“The secret of all victories lies in the organization of the nonobvious." -- Marcus Aurelius

Lessons For All Financial Conditions

Few people have ever heard of Sandy Irvine. There is evidence to suggest that he may have been first to the peak -- 29 years earlier than Hillary.

Irvine’s climbing partner George Mallory’s body was found just a few hundred feet from the peak. Since the highest temperatures are well below zero, clues are well preserved. Irvine’s camera with the answer has not been found -- yet. Therefore, we may never know in those three decades in between if others may have also reached the peak.

This much is clear. Hillary gets the credit because he was the first to make it all the way back down to be able to tell the story.

I was trained on Wall Street to climb mountain charts in the late 1990s. There before me was a dizzying map of different paths to invest in diverse assets. Navigating from the lower left of any page along jagged lines to the upper right was the climb everybody wanted to make. As long as there were higher peaks ahead, Wall Street’s answer to any question about risk was “just hang in there.”

It took me many years of studying those little wrinkles in time (we’ll zoom in on one below) -- which looked so smooth if seated far enough away -- before I began to question those stories with math’s tools.

Eventually, I escaped Wall Street’s mountain of conflicted assets because “hang in there” is not a plan. It is recurring revenue for the mountain’s shareholders.

Remember, Wall Street’s obligation and business model is to serve shareholders first. Investors need their own Sherpas, called independent fiduciaries, to lead only their clients’ best interests up AND down mountains -- in all weather and conditions.

The Sherpa of Navigating Mt. Everest

Very few people have heard of Namgyal Wangdi. Born in Tibet, he later lived in the Khumbo region of Nepal. The local Nepalese Sherpas called immigrants like him “Khamas,” which meant low status and no money.

Beginning in the mid-1930s, Namgyal led more climbs of Mt. Everest than any other Sherpa. According to some accounts, it is entirely possible that he was the first to step foot on the peak with his climbing partner Edmund Hillary.

Wangdi said whoever got to the top first made no difference to him. He was more focused on the oxygen tanks that made all the difference for both of them to survive.

Wangdi was particularly skilled at calibrating, operating, and fixing tanks. It turns out that kind of partner is much more important than the climbing part.

Are we talking about mountain climbing or investing?

Yes.

“The winner of the match is not always determined by who is right, but in the end, by who is left.” -- Victor Niederhoffer, Education of a Speculator

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How Do You Thrive in All Financial Conditions?

As a sea-level Sherpa in Houston planning expeditions for families on the path to Financial Freedom, I have found that the oxygen tanks are dividends.

A good Sherpa will plan for what can go wrong ahead. For us, it’s easy because we were there. We just pull up the most instructive chart from our own experience on Wall Street when we began managing money.

For example, the stock market was lower 13 years later than where it started below. We plan for that happening again, starting tomorrow (every day).

Every client we have been hired to guide over the past three decades has been instructed that if they ever hear “hang in there” from us, we should be fired immediately. It has never happened, and will not under our watch!

There are companies that have been paying uninterrupted dividends since Norgay summited Everest over half a century ago. The dividend growth of those companies is shown over that exact same time period in the chart above.

In our humble Sherpa’s opinion, anyone nearing retirement should always plan on starting where this chart begins. You must carefully calculate whether your plan will survive if the Stock Market (the S&P 500 red line above) does not go up for a very long time.

The math gets really treacherous if you are selling from growth to create more income along those declines. What we have found is the best oxygen tanks are dividends providing growth OF income. That’s where you find the financial peak.

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