My sister found a trove of old family photos going way back to the 1800’s. As I looked through the collection, what stood out the most was how dramatically different my life is from what my recent ancestors experienced. In the time frame of humanity 100 years is just a blip, but what a difference it has made. The advancements in science, technology, healthcare, travel and the general standard of living have exceeded everything that was done in the thousands of years preceding it. To say that we are blessed beyond measure in this country would be the greatest of understatements.
 
Yet, if one turns on the news, opens the internet, or listens to a political debate, they would get the impression that Americans have fallen into a deep abyss of despair in a nation filled with crime, pollution, greed, addiction, selfishness and dishonesty. Furthermore, one would be led to believe that we have a horrible healthcare system, unfair taxation, millions of starving citizens living helplessly on the streets, and a divided population that simply cannot get along and complains about everything. Add in morally bankrupt politicians and the picture gets pretty bleak.
 
So, my photo album showed evidence of the unimaginable blessings of living in this great land in 2019, while the noise and screams of the disgruntled voices on our airwaves and written word today might leave one wondering if there is anything left worth being grateful for.
 
Therein may lie the true purpose of Thanksgiving. It is not so much to speak words of thanks but to truly recognize that we have a great deal to be thankful for. Yet gratitude does not seem to be an automatic emotion, nearly so much as ingratitude and the tendency to complain.
 
At the age of 26, I sat in a tent with my uncle and a group of scouts on a mountain in eastern Utah. It had been raining for two days and we were complaining about all the fun we were missing out on. We finally decided to end our trip four days early and go home. I had been backpacking in those mountains a dozen times in my childhood and enjoyed many wonderful experiences, yet as I sit here writing this column I realized I have not been backpacking since that experience. I wonder how many more great experiences I might enjoyed had I not allowed those two rainy days to sour my love of backpacking.
 
Perhaps one of the greatest hindrances to investor success is the tendency to focus on the negative. We remember the losses and economic challenges quite vividly, but in the process forget that the overall picture has been a huge blessing, and continues to be so. Let’s take this special time of the year to not only be thankful for our blessings, but to consider what other opportunities we may be missing out on because of some past negative experience. In the grand scheme, those have probably been no more than a couple nights of inconsequential rain.

​I drove past a business in town and noticed a big tent with banners advertising free hotdogs. In the parking lot stood quite a long line of people waiting for their food. I chuckled when I recognized many successful acquaintances in that line. I thought on the uniqueness of the situation. These well-heeled individuals were willing to wait 20 minutes in line for a free hot dog worth less that a buck. Everyone loves a great deal and especially if it’s free
 
The human desire for “free” has been amplified by our digital world wherein so many services are offered for free, that we have come to expect it. How do you feel when a hotel, restaurant or business does not offer free internet? Though it costs money to provide this service, we don’t want to pay for it. When people order packages online they want free shipping, and free returns. Airplanes used to charge for movies but today, if there is a movie screen in front of your seat, the movies better be free.
 
As a teen I used paper route money to buy Atari video games, but now the biggest video games are offered for free online. Of course, once you start playing you quickly find there are unlimited things to buy within the game if you want the experience to be worthwhile.
 
The financial industry is going through a similar free cycle. Major investment firms have been offering free accounts, free online information and free trades. I have heard it called “The Race to Zero,” as firms seem to be competing over who can offer the most free stuff. Ultimately, we all know there is no free lunch.
 
It costs money to handle investor accounts and to place trades. If a firm offers free trades, then you should do your research and learn how they are covering those costs. Most likely they are using a practice known as “order flow” to do so. In the simplest of terms, order flow is a payment made to a brokerage firm for directing orders to a specific party for trade execution. The spread between the bid and ask price of traded stocks, gives the trader some room to build in profit for himself. He may share some of those profits with entities that direct trade orders to him. This relationship has the potential for a conflict of interest.
 
So, one question clients should ask a firm who is offering free trades is, “Will I end up paying more for stocks than if I just paid a fee to place the trade?” The answer to that question will vary based on the circumstances but investors must all start with the understanding that businesses do not work for free. Understanding how they get paid, and how much, is critical to a transparent relationship.
 
Hot Dogs, movies, video games and investments services all cost money to produce. Educating yourself as to where the money is coming from will help you decide just how free they really are.
 

​Years ago I hired a personal trainer to help with some body building goals. As I worked with him for a few months I saw significant improvement in the way I felt, and the way I looked. After a while I got tired of paying him so I let him go, thinking I could move forward just fine on my own. As you can imagine, over the ensuing months my physical strength and appearance slowly diminished. Eventually I got frustrated and stopped going to the gym altogether.
 
The trainer did not provide me with any great secrets. He did not give me access to better equipment. But what he did was help me setup a workout plan and then, most importantly, he was there every day to make sure I followed it. When I struggled he pushed me to do better. When I wanted to quit, he encouraged me to keep moving. His guidance, which seemed unnecessary to me when I got tired of paying for it, was all the difference between success and failure in a gym where everything else was equal.
 
People often debate about the value of financial advisors, and many are confused about what their real role is.  A company that has had a significant affect in this area is the Vanguard® company. With their multitudes of index type investing funds they have opened the door to low cost investing to millions of investors. They pride themselves in their high number of self-directed accounts. In 2018 they did a survey comparing accounts that were run with and without an advisor to determine if advisors had any real value. The results were very interesting. They found that their advisor-directed accounts outperformed self-directed ones by an average of 3% annually. In investment terms that is a very significant difference. *
As the researchers dug into the results they found things such as investment strategy, asset allocation, tax considerations, rebalancing, and tactical structuring of withdrawals being advantages to the advisor directed accounts. But what surprised them most was that half of the gain, about 1.5%, could be attributed to what they called “behavioral coaching.” In other words, as with a personal trainer, the advisors were bringing significant value by just being there to keep their clients moving forward and sticking with their plan.
When my personal trainer was no longer with me, it was easier to skip a day, work a little less, or quit early when the going got tough. In retrospect, the amount I paid him was insignificant compared to the results I obtained with him at my side, even though the equipment was all the same.
 
Financial advisors are not just there to pick investments, although a wise and well-balanced allocation is a critical aspect of a successful financial plan. But perhaps your CFP®’s most important role is to act like a personal financial trainer, first designing a long-term plan, then standing beside you through life to help you stick with it.
 
*https://personal.vanguard.com/pdf/ISGAA.pef
 

​Financial advisors often write articles telling investors what they are doing wrong. Some print booklets with titles such as, “The ten biggest mistakes investors make,” or “The eight reasons to never own (fill in your favorite investment to hate)…”
 
I would like to turn the tables and discuss mistakes Financial Advisors make.
 
1 – Telling clients they can “beat the market.” First of all, what is the market? Is it stocks, bonds, real estate, or some imaginary index? Focusing your sales pitch on your ability to get a better return than some arbitrary “market” misses the whole point of the second mistake which is:
 
2 – Not understanding what clients really want. I have done this long enough to know that the vast majority of investors mainly want to retire comfortably with enough money to do the things they enjoy. They look forward to enjoying time with their family, while worrying as little as possible about their investments. Their goal is a lifestyle, not a number. Advisors often miss that. If, in an attempt to obtain some arbitrary big number they cause their client to lose sleep because of an overly volatile account, then they have misunderstood why they were hired in the first place.
 
3 – Not taking into account that their clients risk comfort level may be far different than their own. Many advisors are younger than their mostly retired clients and have relatively high incomes. They also may better understand investment opportunities and so are able to handle more volatility (in their personal accounts) than most of their clients. Thus, too often they put clients at a higher risk than the client is comfortable with.
 
4 – An advisor once told me he didn’t want to get his CFP® certification because he felt he could make just as much money without it. I explained to him that a financial advisors’ first job is to do what is best for his clients, and that included continually increasing his education and skill level. (Which is required to have and maintain a CFP® designation) Financial advisors are regularly offered educational opportunities in two main areas: Financial planning for the client and increasing profits for themselves. Far too much time is spent by advisors pursuing the latter.
 
5 – Not communicating with their clients. In a prospective client questionnaire I ask “Is there anything you would change about your prior advisor relationship?” The number one answer to that question is some form of, “He never called me.” It would be irresponsible to manage someone’s life savings without regular contact with them. Yet it happens.
 
6 – Selling investments without proper due diligence. Clients often do not understand their investments, but they trust that their advisors do. Since investment firms regularly pitch their products to advisors, this can sometimes lead to an investment recommendation to a client that the advisor really does not adequately understand.
 
Financial advisors play a valuable role in their clients’ lives. It is important they take that fiduciary responsibility very seriously.
 

​Our African safari included a tracker who sat in a chair mounted on the front of the jeep. Over multiple game drives we gained a great appreciation for his remarkable skills. Each drive would begin with his asking what we wanted to see that day, and without fail he would find it for us. Whether a full-mane lion, a pack of wild dogs, or a baby rhino, our tracker was able to find them. Even though the dirt roads were covered in dozens of overlapping tracks, he could pick out, from a moving vehicle, the specific animal we were looking for. One time while searching for lions he motioned for the jeep to stop and then jumped off and came around to my side. He pointed to the dirt and said, “Lions, heading northeast, less than an hour ago, large group with a few cubs.” As I looked down all I saw was bumpy dirt. So, he bent down and drew circles around the tracks so I could pick them out.
 
I shook my head and asked, “How do you do that?” To which he replied, “A lifetime of practice.” He explained that his dad was a tracker and that he began tracking with him as a young boy. He started with small animals and as his skills improved, moved up to larger game and eventually to the big cats. He told us there is nothing more dangerous than tracking a predator since they may also be tracking you.
 
Sometimes as a financial advisor I feel like a tracker. I walk among thousands of investment options, searching for a specific solution for a clients’ needs. I pass the tracks of many other investments that could potentially confuse the search or lead me in the wrong direction, but I stay focused. Most investment firms have clever marketing that further confuses the task. Over my years of experience, the search has become easier. Like my tracker friend, what once seemed difficult now comes more naturally as I search for that specific track in the sand.
 
On several occasions our tracker would leave the safety of the jeep and walk off into the trees, unarmed, in search of a large predator. His years of experience gave him confidence to do what few could do, or would be willing to do so that we, his clients, could follow in the relative safety of our jeep to reap the reward. His years of experience gave me confidence as we sat in the jeep within touching range of huge bull elephants or a pride of lions. Though the animals were sometimes a bit frightening to me, I trusted his skill and judgement.
 
Investing is sometimes unsettling. The unknown can even be frightening at times. Having a seasoned guide can make all the difference. Our African safaris reminded me that there are some things in the wilds of Africa, and in the jungle of Wall Street, that only age and experience can prepare you for.

​As a pilot I am often asked, “What if something goes wrong?” Things do go wrong sometimes, but passengers rarely hear of it. They go wrong for commercial pilots too. In one funny exchange I heard a commercial pilot announce an urgent landing due to a “strange smell in the cockpit.” That definitely generated a few chuckles.
 
So, if things regularly go wrong why are accidents so rare? It is because aircraft engineers understand that everything will eventually fail so they design planes with several layers of backup. Planning for failures by having contingency plans makes most problems non-events.
 
On one flight my altitude indicator quit, but I had four more. When I landed safely, I had the instrument repaired. A challenge for aircraft engineers is, what if a single event takes out everything? This is known as a single point of failure. For example, a lightning strike might create a surge that disables all electronic equipment. To protect against this, engineers design redundancy in such a way to reduce the risk of a single point of failure. For this reason, I have backup instruments that are not powered by electricity.
 
Investors face the risk of failure. Occasionally stocks fall, real estate slumps and bonds default. We must accept that upfront. My opinion is that one of the greatest risks to investors is a single point of failure. In 2008 many people suffered terrible financial losses because a single economic event took their whole portfolio down, and most importantly, they did not have sufficient backup in place to get them through while the markets were being repaired.
 
An airplane is an amazing tool and a great blessing to humankind. Parts of it fail occasionally but that does not eliminate its value or justify avoiding its use. It is just a reminder to have backup as well as a plan to avoid a single point of failure. Wise investing has also brought many benefits to countless individuals. Things fail sometimes but that does not eliminate its value or justify avoiding its use. It’s a reminder to have a backup plan that also attempts to protect against a single point of failure.  I frequently discuss the power of diversification with my customers, since assets can react differently to an economic event.
 
If a person could have bought the DOW Jones index* in 1892, its 127-year average returns would have likely put a smile on their face. Yet all of the original DOW members are gone except General Electric, which is clinging to life. This most famous of market indexes has succeeded despite regular individual failures.
 
Manage your portfolio like an aircraft engineer. Accept that occasional failure is normal. Have backup plans to keep you flying. And try to diversify in such a way to avoid, if possible, a single point of failure. Avoiding some failures is not possible, or even necessary. Continuing to move forward in spite of them should be the goal.

​Launa and I recently returned from a photo safari to Africa. Even though it was on our bucket list, we had some apprehensions about this trip given the immunizations, safety warnings, political uncertainties, etc.. The unknown always brings with it some anxiety and so we did all we could to educate ourselves on our destination. As it turned out, Africa was one of our favorite trips ever. There is so much beauty there, in the land, the animals and especially the people.
 
As part of the plan we decided to travel during the dry season. The temperate part of Africa where we visited has two main seasons, a wet and a dry. During the wet season it rains almost every day and the land is lush and green. During the dry season it rarely rains, the landscape dries out, and water is difficult to find. One would think the beautiful wet season would be a better time to travel, but we had read that there are benefits to travelling when it’s dry. Though the trees are mostly bare and the fields dry, the lack of vegetation makes it much easier to see the animals. During the wet season there are lots of animals, but the abundant vegetation gives them many places to hide and an easier life. During the dry season life becomes tough so only the toughest animals survive. Those that do are easier to find as they congregate around the few watering holes and streams that remain. So, for those looking to see the strongest animals, and their interactions with each other, the dry season is the best time.
 
The economy also has its wet and dry seasons. Often investors are tempted to rush and buy during the good times when markets are strong and profits are rising. But the problem with good times is, it is very difficult to distinguish between good investments and bad. It is easier for a weak business to succeed when the economy is strong, and investors can be lured into buying companies that may not be able to withstand the economic dry seasons that surely will follow. I find that investing when times are tough is perhaps the best time to find great companies. Like the animals, if a company can do well during the dry times, they may be a good candidate to flourish even more when the spring rains come.
 
After 10 years of economic strength, many companies have gotten fat and happy and perhaps a little sloppy. Feasting on the lush economic forest from the steady rain, these businesses may not survive as well when the next drought comes. When I review investments, our office does what we call an economic stress test. Our goal is to calculate how certain investments might do when the rains stop. Assess your own investments. They may have done well during the easy rainy season, but how will they fare when things dry up? Todays’ profits won’t matter if you give them all back during the next drought.

​I am pretty happy this week because our St. George airport has finally re-opened after being closed for runway repairs. Though only a few years old, the runway had become unusable due to damage from underlying expansive soils. The loss of air service, and the high repair costs could have been easily avoided had the runway been built properly in the first place. Site engineers initially recommended procedures to protect against the well-known soil problem, but government officials did not want to spend the money. As is often the case, the cheaper route ended up being the most expensive.
 
It’s common for people to do things on the cheap up front, only to pay a much higher cost down the road. Investors are prone to this same tendency as they resist spending the time and money to get things right the first time. Here are just a few situations I see regularly where people know what they should do but try to cut corners anyway.
 
1 – Not saving enough. I suggest saving 10% of income during the working years, but 5% at a bare minimum. Not doing so when you are young can result in a financially difficult retirement.
 
2 – Not buying sufficient life insurance. Unless you are unhealthy, term life insurance is very inexpensive, while the cost of not having it can devastate those left behind. I married my wife, Launa, after she had been widowed at the age of 22, with two small children. I see no excuse for not having basic life insurance if people depend on your income.
 
3 – Not getting some financial education. If you don’t take the time to learn basic budgeting and investing concepts, the mistakes you will make can be costly.
 
4 – Not being willing to hire professionals. I know more about income taxes than most people, yet I pay a CPA to do my taxes. I have a pretty good understanding of legal matters, but I pay lawyers to do my personal and corporate legal work. I have extensive knowledge of investing, yet I regularly pay specialists to teach me more. Hiring a CFP® professional to help with your financial planning may help you avoid expensive mistakes.
 
5 – Not hedging a portfolio. It’s fun owning an all growth portfolio, until a recession comes. Balance your account with some lower earning investments that are less affected by market swings. It will cost you a little in returns when times are good but may save you from a painful loss when things turn ugly.
 
6 – Not correcting mistakes. Spend the time to review your investing mistakes and learn from them so you don’t repeat them.
 
Nothing looks more beautiful to a weary pilot at the end of a long flight than that lovely runway out the window. Nothing looks better to a weary worker as they approach retirement than a well-planned and properly maintained retirement account. In both cases, success depends on being willing to spend the time and money upfront to do it right.

​I would like to share some thoughts with my younger readers. In my youth I remember thinking there were two types of people, old people and young people, and I was one of the young ones. I never realized I would one day join the other group until recently when I entered a crowded waiting room and a member of the “young” group stood up and offered me their seat. I wasn’t sure if I should be grateful or offended.
 
In young adulthood, Americans have a mountain of ambition, energy and responsibilities. A house, car, education, children and the never-ending school fund raisers take their toll on a young family’s budget. Each item demands priority as often-meager funds are allocated. Young people also know they should start saving for retirement but with so many other needs, many decide to put it off. This is not surprising since few people in their 20’s can comprehend actually being 70 one day.
 
A person fresh out of school can expect to work for 30-40 years, followed by another 30-40 years of retirement. Consider the financial math of that reality and you will see the need to make an early and regular friend of the power of compound interest. Simply put, you must get some of your dollars set aside and working for you, or those last 30 years may be very tough.
 
Young people regularly tell me they simply can’t afford to save for retirement, but when they have some extra cash, they will set it aside. As the years go by most learn the harsh reality that “extra cash” is never going to magically appear. Some current need or want will always try to take priority. And so the best and perhaps only way to solve the challenging math of retirement is to make saving for it a non-negotiable part of your young budget. You must start early and save regularly. Doing so should be as important as budgeting money to put food on your table, because one day that is exactly what it will do.
 
If it seems difficult to live on a tight budget while you are young, healthy and working, imagine how tough it will be when you are old, unhealthy and unemployable. You owe it to your future elderly self, to set aside money today because the person in the best position to care for you financially when you are 70, is you, while you are still 30. Let me emphasize that point. No government program, charitable organization, or well-meaning family member is in a better position, or has a greater motivation to care for you at 70, than YOU while you are still 30, 40 and 50. Start today and make the financial well-being of your future self a personal priority by regularly investing into a retirement account. Believe it or not, you will one day join that group of “old” people, and when you do, your elderly self will be very grateful for the sacrifice the young you is making today. 

​I have decided this week to list a few areas of the economy that I believe are worthy of a look by investors. I base my thoughts on the well-known elephant theory that I teach regularly. It is that if you want to capture an elephant, you don’t sneak up behind it with a rope, but you decide where they herd is heading and get out in front of them and dig a big hole. Here are my thoughts on where I think the American herd is heading.
 
Healthcare: This sector has been strong so some may argue it has gone up high enough. But when I look at the size of the growing American population, and the aging of the large baby boom demographic, I only ask myself one question. Will Americans 10 years from now be using more or less healthcare than they use today? The political debate over who will be paying the bill does not concern me. I focus instead on the amount of dollars that the sector will be receiving, and I am very confident our healthcare needs and costs will be growing.
 
Technology: This sector has been hot for several years and for good reasons. One industry analyst put it in simple terms for investors. He said, “Everything that can be automated, will be automated. In cars, airplanes and dishwashers, the future is mainly about the software.” As I write this column, my little robotic vacuum is making the most beautiful vacuum lines you have ever seen as it carefully circles my chair.  Technology has a long way to go to automate everything.
 
Leisure: This sector encompasses everything that has to do with recreation and vacationing. If you have been on vacation this summer you already know how crowded the hotspots are becoming. The newly retired and financially fat baby boom generation places a lot of value on seeing the world. They love to travel and they love to play. Whether it be cruise lines, hotel chains or theme parks, anything that fills the insatiable need of this generation to get out of the house and play is worth taking a look at.
 
Consumer Discretionary: This final sector focuses on products that people don’t really need but love to have when they are feeling good financially. Consider how often a package is delivered to your own front door these days, and those of your neighbors, and you will see the power of discretionary spending. Remember, not only are the baby boomers a huge generation, but they have mostly already earned their money, and love to spend it. Retired people don’t lose their jobs in a recession. So discretionary spending by this spend-happy generation is worth looking into.
 
These are not recommendations to invest but merely ideas to consider as you decide where to place your money. I have always found it best, when the herd is moving, to pay attention to the direction it is heading and get out in front if you can.