Reaching the Top (Part 1)

Is investing like climbing mountains?

I thought about this when I looked at the career of Ed Viesturs, the first American to climb all 14 of the world’s 8000-meter peaks—all without supplemental oxygen. He has sometimes been called a risk-taker, but he bridles at that description. He defines himself as more of a risk manager, continually assessing the conditions and deciding whether to go forward to not.

Because the air is so thin and conditions are so extreme where these high peaks jut up into the jet stream, high-altitude climbing is extremely dangerous. Some have calculated that just being part of an expedition gives someone a 1 in 34 chance of being killed. But climbing isn’t like playing roulette. Yes, unlucky events like a random rockfall can be fatal, but there are prudent ways to avoid such un-chancy occurances.

In his quest to summit these peaks—an 18-year odyssey—Viesturs was on 30 expeditions. While climbing, he decided to turn back ten times—four times when he was within 350 vertical feet of the top. His conservative perspective led him to adopt the credo, “Getting to the top is optional, getting down is mandatory.” This approach kept him around to come back another time.

If I were to adapt his doctrine for money management, it would be say “Return on capital is optional, return of capital is mandatory.” This has implications for asset management, economic analysis, portfolio rotation, and security selection.

Investing, like climbing, involves a combination of luck and skill. By managing risks rather than blindly taking them, we improve our odds and avoid becoming victims of the mountains—or markets.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2014-03-25T09:33:51+00:00 March 25th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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