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

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