Hovering 3,000 ft above Yosemite Valley in 2015, celebrated rock climber Alex Honnold was moments away from dying. He’d began his day hoping to become the first to free-solo climb the heralded peak known as Half Dome—without ropes, safety gear or climbing companions. Instead, he was about to become famous for perishing while making the attempt.
“I got so scared as I got up to a certain sequence. I was like, Oh, this feels like my foot’s going to slip and I don’t want to fall. And then I tried to use some other footing, but I was like, Oh, this doesn’t seem right, this seems worse. So, I was standing there hesitating, being like, What should I do? What should I do? And then I start to get all gripped up, like, Oh God, what if I can’t figure it out. And I’m obviously getting more and more tired as I stand there, calves and arms burning.”2.
While hanging from a ledge on the brink of disaster, Alex didn’t know exactly what to do. Emotion and doubt took hold, and he found himself second-guessing his own experience and ability.
The truth was he knew he had not properly prepared. In fact, he intentionally chose not to rehearse Half Dome too much as it might take the “adventure” out of the experience.
Like others caught in the throes of uncertainty and fear, Alex momentarily lost his way and almost made the ultimate mistake of choosing an unproven route where death was a real possibility. Fortunately, he pulled himself together, found his way back to his planned course, and accomplished his mission.
Approaching El Capitan Differently
Fast forward two years to June 3, 2017. On this day, Alex embarked on a free-solo climb of another perilous peak—El Capitan, a 3,000 ft vertical, granite wall in Yosemite, Calif. The stakes were high as Alex ascended what some have coined the “most challenging vertical face in the world,” with death being the ultimate price should anything go wrong.
This time his preparation looked quite different. He had climbed the El Cap wall in his mind over 1,000 times, studying the rocks microscopically. For months he had repeatedly rehearsed the path he would climb without ropes, memorizing every granular detail and maneuver.
Knowing in excruciating detail every foothold, fingerhold and step he would take prevented the chance of mental error. In fact, he knew the precise steps to take even in the most challenging moments. He had a clear plan, and he had total faith in that plan.
Alex had sought the deepest understanding possible of his practice as well as the failures of others who had died during similar feats in the past. He knew fanatically that every move mattered, and there was no room to speculate or rely on luck. Ultimately, he worked to prepare and manage every aspect of this death-defying climb that he could ahead of time.
Regardless of El Capitan’s reputation as one of the most difficult climbs in the world, Alex’s intensive planning made the ascent easier than his near-fatal climb of Half Dome. As a result, on the day Alex scaled El Capitan, he described it as a “walk in the park.”
Applying Alex’s Climbing Strategies Toward Investing
While no one is going to die from investing improperly, failing to build wealth can have dire consequences. It can impact your ability to send your kids to college, pay big bills, and eventually retire with peace of mind.
And yet, so many individuals take the Half Dome approach with their financial lives. Often they don’t even have a financial plan or an investing strategy in place. Even if they do have a plan, knowing what to do is one thing, actually doing it is another.
When a challenging moment comes along, such as the U.S. stock market plummeting by nearly 15% this past December, the ultimate price of selling out of investments at a market low might occur.
As a client of Wealthspring, you can rest assured that you have a clear financial plan and investing strategy in place. The investment approach is grounded in Nobel-prize winning research that follows proven principles. Some of these include avoiding market timing, maintaining appropriate cash reserves, and diversifying across multiple investment categories with careful attention to your cash flow needs.
When a disastrous period occurs in the stock market, prudent rebalancing occurs and you’re reminded to stay the course. Quarterly meetings have prepared you for this moment of concern by repeated review of asset allocation, cash reserves, spending needs and, at times, by role playing bear market scenarios.
While stock market volatility often causes concern, with the appropriate plan and preparation, a market sell-off might inspire buying more stocks while they are on sale and looking for appropriate opportunities like tax loss harvesting or Roth IRA conversions. Obviously stocks going down never feels very good, yet for those who expect it and have thought out the best way to maneuver during these volatile times, it might even seem like a “walk in the park.”
Looking Back at 2018
Here’s a quick run-down of how various investment categories performed in 20181. :
#1 performer for the first time in 15 years: cash at 1.8%
#2 - Bonds - 0%
#3 - REITS - -4%
#4 - Large Cap Stocks - -4.4%
#5 - Small Cap Stocks - -11%
#6 - International Dev. Stocks - -13.4%
#7 - Emerging Market Stocks - -14.2%
Asset Allocation Mix 60% stocks / 40% bonds -5.8%
1. JP Morgan Guide to the Markets, U.S., 1st Quarter 2019, as of December 31st, 2018, https://am.jpmorgan.com/blobcontent/1383598874518/83456/MI-GTM_1Q19_.pdf