​Our second home in California home has some beautiful plants but one of my favorites is the plumeria. The delicate flowers on these plants put off a lovely fragrance that becomes more powerful at night. Coinciding with the strong scent of the plumeria is the nightly arrival of the sphinx moth, eagerly seeking the sweet nectar on which they must feed. Since the plumeria fragrance is stronger than the surrounding flowers, the sphinx is attracted first to them, flying rapidly from flower to flower. As they do so they fulfill their important role of pollinating the Plumeria, but unfortunately, all is not as it appears, or smells, to the frustrated moth. Despite its strong and lovely aroma, the plumeria flower contains no nectar, and so the poor deceived moth who has provided much service to the plant, receives nothing in return. Yet every night the moths return, failing to learn their lesson.
 
The investing world has its own versions of the plumeria plant in the form of opportunities that may look tempting or smell good but have little or no nectar to offer in return. It may be a stock market that takes a big dive and the investor thinks “Oh look how far it has fallen, it will rebound quickly” and so he jumps in chasing the sweet smell of quick profits. Or the market has been on a long and rapid climb and he thinks to himself, “This market is so wonderful. All it does is go up,” and once again he piles in only to learn that the nectar has run out just before his arrival.
 
What the Sphinx moth does not realize is that the plumeria flower does not care about the moth. The selfish plant only cares for itself and night after night sends out false signals to attract the moth for its own gain. Such behavior would not be a problem for the sphinx if the moth would just learn its lesson. What some investors often fail to understand is that the stock and bond and real estate markets do not care about individual investors. The markets seek their own good and often in so doing send out deceptive signals that lure in the nescient investor, over and over again. Investor behavior as they chase from one “flower” to another was illustrated in two headlines I read this month only days apart. The first read, “Investors Flee stocks for the safety of Gold,” followed by “Investors rush to buy stocks on renewed hope.”
 
If the deceptive short-term behavior of the markets tempt you to flit from one opportunity to the next, you may want to consider the often fruitless nightly efforts of the sphinx moth. Then focus your efforts on patiently seeking out, then holding on to, those investments that can provide you with flow of rewards upon which all great investors build their futures 

​In my youth I loved backpacking with my uncle and his Boy Scout troop in the mountains of Eastern Utah. I have many fond memories of beautiful vistas, campfire stories and lots of fish. Over the years I transitioned from being a young scout to a seasoned adult backpacker. With the transition, my backpacking experience changed. As a boy it was all about the fun. As an adult leader I spent more time in the preparation stage, and found joy in helping to provide a happy and safe experience for the young scouts. This was brought home one day when a fierce lightning storm came upon our group while out on a day hike. The lightning and thunder would hit simultaneously and the hair on our heads literally began to stand up. The boys thought it was great fun, but the leaders only thought was for the safety of the troop.
 
Successful backpacking requires a careful consideration of how much weight to carry. If you carry too much you risk injury. If you carry too little you may lack critical supplies. Hiking in primitive areas, there was nowhere to turn in an emergency except to ourselves and what we carried in. I didn’t learn until I was older that the leaders carry a lot of extra weight so they will have the necessary medical supplies and equipment, and even spare food, to care for the troop if things don’t go exactly as planned.
 
Preparing for retirement it is not unlike preparing for a backpacking trip. You are heading into unknown territory (at least to you) and the lifelong safety nets, such as a weekly paycheck, are no longer there to bail you out. You must fill your retirement backpack with everything you will need, or may need, for your journey.
 
In November 2017, Forbes magazine ran an article on retirement planning that should concern all who are preparing their pack for this adventure. They reported that 65% of adults over age 50 provide monthly financial support to at least one adult child, and that 25% of Baby Boomers support a parent. So, like a good scout leader, it may not be enough to just figure out what you might need in retirement. You may want to consider packing a little extra in case some loved one around you needs your help. In fact, I have personally worked with many retirees who were well prepared for retirement but whose financial health suffered under the weight of caring for other family members.
 
My wise uncle taught me that being prepared for a backpacking trip made the difference between having a great time or finding yourself stuck on a mountain and dreading it. And that meant being prepared to care for others as well. Retirement is a tough time to come up short on supplies so prepare your “pack” with what you need for yourself, then carry a little extra for those unexpected emergencies that are certain to occur along the way.

​I once served on a board that was tasked with helping to grow a business. The members each had special talents they brought to the table and together we hoped we could share our strengths and find success.  As time went on it was interesting seeing the different perspectives of each individual and how they worked together, even though not always agreeing, to accomplish the same goal.
 
It was apparent early on that there was one individual in the group who, despite his qualifications for the position, seemed to struggle to work with the other team members. He was what some might call a real downer. He reminded me of the lonely donkey, Eeyore, in the “Winnie the Pooh” series. When he walked into a meeting, it was as if a little rain cloud followed him and filled the room. 
 
One day this individual announced to the group that due to some life changes, he would no longer be able to serve on the board. In the weeks that followed his departure, the atmosphere in the group changed dramatically and the business we had been building began to flourish in new and exciting ways. It was like that moment after several days of rain when the sun finally peaks through and you had forgotten how beautiful it was.
 
I have often pondered the negative effect this single individual had on the entire organization. I learned from this experience that one bad apple truly can spoil the whole bunch.
 
It is normal in every investment portfolio for there to be winners and losers. Often this is the natural result of economic cycles. But sometimes there are investments that are truly bad apples. These things don’t just go down, but they go down a lot and they keep going down. If these “bad apple” investments are allowed to persist they can pull down an otherwise solid portfolio. This might be a poor investment that you own but one you cannot let go of because of some emotional attachment. It may be some get rich quick scheme your crazy uncle or next-door neighbor introduced you to. Or it may just be that “fun money” account you set aside for day-trading that does nothing but lose money.
 
Whatever the reason, and no matter how you feel about it emotionally, if you have a bad apple investment in your life, get rid of it. It just isn’t worth the cost. I have learned from looking at many portfolios that a single bad investment can pull down an otherwise well-designed retirement account.
 
It is hard to admit when we make mistakes. It is sometimes difficult to cut things loose in our lives that we are attached to. But no one needs little dark rain clouds in their lives and certainly not in their investment portfolios. And you may just find a little extra sun shining on your portfolio.
 

​I just love a good thunderstorm. Last week we sat on our balcony and watched in awe as one moved across the valley, complete with pounding rain, high winds, lightning and hail. A few days later Launa and I found ourselves boarding a commercial flight from Dallas as storm clouds gathered overhead. The airline told us they were rushing to get out ahead of the storm but I reviewed my own aviation weather sites on my cell phone and told Launa weren’t going to make it.
 
Within minutes of pushing away from the gate, the rain started and the pilot announced we would not be able to take off until the storm passed. Thunderstorms have a huge amount of energy and no pilot, even in a large commercial jet, would intentionally fly into one. The pilot told us that rather than deplane everyone, he was going to taxi to the end of the runway and wait out the storm. Sitting on the taxiway, with several other jets, we had a front row window seat for the thunderstorm as it pounded the airport and lit up the skies.
 
Despite how dangerous a thunderstorm can be, they are also very short lived and so after just 45 minutes, the skies had cleared and we all took off for a very uneventful flight home. The pilot knew the storm made it unsafe to fly, but he also knew that it wouldn’t last long so there was no reason to cancel the flight.
 
In investing we have events similar to thunderstorms that we call recessions. Investors often fear recessions and obsess over when the next one will come. Many refuse to invest at all if they think there is potential for a recession. Such thinking would be like an airline cancelling flights if they thought there was a potential for a thunderstorm. In cities like Dallas in the summertime, you might as well close the airport since there is a potential for thunderstorms every day. Such a fear of thunderstorms would negate all the benefits flying can offer.
 
Likewise, the fear of these financial thunderstorms, or recessions, can negate the benefits of investing. Like thunderstorms, the potential for recessions always exists, but these very natural occurrences are relatively short lived. Just as an airline won’t cancel a full day of flights over a 45-minute thunderstorm, investors should not let fear of the occasional recession spoil their opportunity to invest. Seasoned investors, like seasoned pilots, just wait them out when they occur.
 
Thunderstorms and recessions come and go, but I don’t let either spoil my flying or my investing. I have learned to make the most of the more frequent good times and simply be patient for those few moments when the storms are passing through. 

​I read an interesting description of procrastination. It said procrastination is the result of the human inability to accurately predict how we’ll feel tomorrow. For example, when I get up in the morning I know I need to exercise but I don’t always feel like it so occasionally I put it off until later. I guess I assume that sometime in the future I will feel more like exercising. But when “later” comes I still don’t want to exercise and get frustrated with myself for putting it off. Procrastinating a necessary but unpleasant activity like exercise in hopes that it will be more pleasant later is to deceive oneself.
 
For most people saving money is not nearly as fun and spending it. Yet wisdom dictates we should save money, so we set goals to do so. Then when the paycheck comes we look at our bills and think, “This is too hard today. I will just save some from my next paycheck instead.” But when the next paycheck comes, setting aside money for savings will not have become any easier. Your procrastination in this case is based on the incorrect assumption that you would feel differently about saving in the future, but you won’t.
 
In a recent poll conducted by the Fidelity company, the average American estimated they would need about $1.7 million in savings for a good retirement. Surprisingly 2/3rds of those polled felt pretty good about their prospects of achieving that goal, even though very few were on track to do so.  Their justification for the optimism was that they intended to increase their savings rate at some future time, when they could afford it.
 
My own meetings with thousands of retirees have shown that very few retire with as much money as they had planned on. Many have unrealistic expectations about retirement because in reality, the money they are setting aside simply does not add up to the nest egg they believe they will need. Countless people have likewise told me they intend to increase their retirement savings at some future point, but just can’t do so right now. They have fallen into the trap of inaccurately predicting how they will feel about saving money tomorrow. Like most procrastinators, they fail to realize that sacrifice doesn’t get any easier by putting it off.
 
If you want to increase your odds of a good retirement I suggest doing the math and then committing to start saving today, whatever amount is necessary. I am always happy to sit down at no cost with any person, at any stage in life, and help them put together a plan. Putting it off until tomorrow will only make it more difficult, not less. People often come to a financial advisor for investment advice, but no amount of brilliant investing can make up for a person who is unwilling to commit to a disciplined savings plan. Don’t procrastinate your retirement planning because every day you wait, your likelihood of success becomes increasingly more difficult. 

When I was young I purchased a lot of model airplanes.  I bought them at the local hobby shop, which was my only option back then. Their selection and prices were all I had to choose from.
 
Today’s consumers have access to products from almost unlimited sources. If I wanted a model plane today I could find hundreds online and then arrange my options using that amazing tool known as the “sort by cheapest” button.
 
This same tool is used millions of times a day by people looking for things such as clothing, hotels, toys and airline tickets. Once the list of options is sorted, the decision process becomes very personal. There are some who buy the cheapest as a matter of habit. Others may scroll down to consider if value increases with price. Unfortunately, there is not yet a “sort by quality” option.
 
Airline tickets are a unique example of the emotional struggle the “sort by” button has created. In a recent study, one of the most popular airlines in the country was also listed as the cheapest. That comes as no surprise since everyone loves a bargain. But in the same study travellers revealed that this very same airline was also the worst to fly on. What this survey revealed was that much of the travelling public will buy the cheapest seats, then complain that they have no legroom, no snacks, and have to pay extra for luggage. I wonder, just what part of “You get what you pay for,” do American travellers not understand? Apparently, the flying public is fine with being disappointed so long as they get a good deal. I however, am personally familiar with the costs to own, maintain, and safely operate an airplane and this is one area of my life where I would never “sort by cheapest.”
 
There is another area of life where I have personal experience, and would never “sort by cheapest,” although I know many who are regularly tempted to do so. It is in investing. When you sort investments, what constitutes the “cheapest” options? From a purely mathematical point of view it would be the highest rate of return. So, an investment that paid 10% annually would be cheaper than one that paid 5% annually since you would only need to invest half the amount of money for the same return. But the cheapest investments are rarely the best since there is a higher risk that you may not actually obtain the promised higher return.
 
Though investors are tempted to chase high returns, they must remember that in almost all areas of life, “sorting by cheapest” will result in an inferior product and increase the likelihood of disappointment. If you buy the cheapest airline ticket, be prepared to be uncomfortable in your seat. If you buy the cheapest investments (those with the highest returns) be prepared for the increased likelihood of being disappointed. Like most shopping experiences, a wise investor can usually find a happy balance of quality and price between the two extremes.  

​Last week I discussed how some investors perceive more risk in the stock market than may actually exist. I compared them to a nervous passenger grabbing a parachute and jumping out of a sound airplane because they feared otherwise harmless turbulence. There is another side to the incorrect perception of risk and I can illustrate it with an aviation example. About 20 years ago, brothers Alan and Dale Klapmeier began producing the Cirrus line of small aircraft. These planes were groundbreaking because they contained a parachute that could float the entire plane and its passengers safely back to earth in an emergcncy.
 
The plane became a hot seller as it gave a great sense of peace to pilots and their passengers. The parachute changed the way people perceived the risk of flying in small planes. Surprisingly however, for the first several years the Cirrus’ fatal accident levels came in much higher than other non-parachute airplanes. It was determined that, among other things, having a full plane parachute to fall back on gave the pilot a greater perceived sense of safety. This resulted in some pilots taking more risks, mostly in poor weather conditions, than they would otherwise take. Thus, the perceived “safety” of the parachute had the potential to make the plane less safe. Cirrus eventually turned their safety record around through intensive pilot training.
 
Investors who perceive the stock market as having too much risk often move their assets into the bond markets. Others might just put their money in bank savings accounts and CD’s. They do this because they perceive these income products as having less, or even no risk at all. This is incorrect thinking since every possible place you could put your money has risk. To not recognize that is to become like one of those early Cirrus pilots who thought the airplane parachute could get them safely out of any bad situation.
 
We live in a time of very low interest rates, especially when it comes to government insured products such as CD’s, Treasuries and the like. Consider this. The largest debtor in the world is the U.S. government. If interest rates can be kept very low it will save the government billions of dollars. Since it is the savers who provide the money to fund that debt, it is those savers who are also helping to shoulder much of the cost of that debt. They do so by accepting interest payments that don’t even keep up with inflation. Thus, low interest rates actually become a stealth tax on savers and puts them at risk of not being able to fund their own retirement.
 
So beware of the perception of too much risk, but also be cautious of investments that you perceive to have little or no risk, because there may be more risk than you realize. It just comes in another form. Financial parachutes can be a great thing, but don’t let them lull you into thinking they will eliminate all risk.

I looked out the doorway of my hangar on a hot Saturday afternoon, watching another Regional Jet depart as I did some cleaning. I knew from years of experience that those summer thermals were creating a turbulent ride for the passengers in that plane, yet as I watched from the ground the flight looked as smooth as glass. As always, I found myself wishing I was in the air, while on that hot day I was certain many of the passengers experiencing the turbulence in that plane were wishing they were on the ground. From where I stood the flight looked smooth and controlled. For the passengers if would have felt unstable and even frightening. Perception can be so different based on your point of view.
 
During the first ten years of this century the investment world went through what became known as the “Lost Decade.” Lost, because many of the major market indexes ended the decade about where they started. During that time there was a money manager who ran a fund that defied all odds and turned in an annual rate of return slightly above 17%. The manager was heralded for his brilliance in the face of enormous odds, and was highlighted on talk shows, in newspapers, and national magazines. His returns would have been great even in good years, but they were miraculous during bad ones. And of course, investors nationwide wished they could have been invested in his amazing fund – or did they?
 
Behind the phenomenal returns lay a dark reality. In a study conducted by Morningstar®, they calculated that despite the funds 17% annual return over 10 years, the average investor in this particular fund actually lost 11% per year. The surprising conclusion was that investors in the fund were behaving like nervous passengers on a bumpy airplane. The rough economy of that decade created a turbulent ride for investors who would jump out of the fund whenever they perceived danger, and then back in when things calmed down. This led to a continual “Buy high, Sell low” cycle. As the fund headed for a record-breaking decade, the perception of danger kept most investors from enjoying it.
 
It’s a good thing airplanes don’t offer parachutes to passengers, otherwise they might be landing with a lot of empty seats. Many passengers perceive far more danger in turbulence than actually exists. Investors likewise constantly talk of volatile, uncertain and crazy markets as if today’s movements are unique.  Unlike airplane passengers however, investors do have “investment” parachutes, and they often use them to abandon an otherwise sound financial plan(e).
 
There are real risks in investing, but one of the greatest is the human aspect that often perceives danger and acts on it, and in so doing might create an even greater risk. Think carefully before deciding to use that investment parachute. You may be departing a sound financial aircraft while at the same time jumping to a new uncertainty below.

​With all this talk about building walls, I thought I might share my own experience with walls. When I was 25 I decided to build a block wall around my yard. I wasn’t skilled in masonry, so it took a long time to lay each row. I built the wall in 20-foot sections and installed rebar every four feet so that I could pour concrete down the holes in the cinder block, which would tie the whole structure to its footings.
 
When I had finished the first 20-foot section I stood back and admired my work. It gave me a great sense of accomplishment. Now it was time to fill the rebar cores with concrete. As I thought about all the work involved in mixing that much concrete, and then trying to pour it down those holes, the tops of which were six feet high, my enthusiasm for the project waned. There was so much more excitement in seeing the new sections of wall go up that I decided to continue on with the next row. I figured that at some time in the future I would find a friend to help me fill the cores.
 
Working in the evenings over the next six months I managed to finish eight more sections of wall, giving me significant privacy around my yard. The more sections I completed, the more excited I got with my beautiful wall, and the more pride I took in my masonry skills. The hard and unappreciated task of filling the cores could wait.
 
Then it happened. I awoke one morning to one of those horrible Las Vegas windstorms. After one huge gust shook the house, I looked out my window to see my entire six foot high cinder block wall laying in pieces in my yard. The painful lesson of that image will never be forgotten.
 
A good portfolio, like a block wall, needs a core of solid holdings to anchor it in times of storm. Core investments are long term, sometimes slower moving investments, that often pay steady dividends. They are not sexy and rarely make the “pick of the day” in those monthly newsletters, but they play a critical role in long term financial planning. Plodding along in the background, the core provides consistency and stability that helps to protect you when market winds blow.
 
After years of market growth, investors sometimes allow their more aggressive assets to begin dominating their portfolios and forget to keep adding those less exciting, but very important, core holdings. One way to know if you are getting out of balance is how closely your account tracks the daily market movements. If your account balance is highly correlated to the stock market, you may want to consider making some changes before the next economic wind storm comes barreling through. Those who patiently hold a good core of sometimes less exciting investments are more likely to wake up the next day and find their financial walls still standing. 

A kind couple was opening an investment account and when the question came up about giving them online access they responded emphatically, “No, we don’t want any of our information available online in any form.” I remember thinking of the best way to let them know that their information was already on the internet in many forms and from many sources. It is the nature of the digital world in which we live.
 
News of Cyber-attacks have become commonplace.  Computer hackers were once the 14-year-old next door just having fun, but more often the attacks now come from highly sophisticated criminal enterprises, many sponsored by foreign governments with enormous resources. It sometimes leaves people wondering what to do.
 
It is unknown how many people have had their online information compromised but in 2017 the Equifax hack alone exposed roughly 150 million Americans to cyber criminals. Keep in mind that a hacker is like an old-fashioned burglar. When the door is broken down you know he was in the house, but you may not know which rooms he went in. When there is a cyber-attack, notification is sent to every “potential” victim, but that does not mean your information was actually stolen or will be used.
 
I have decided that the best course is to assume that your personal information has been stolen, and act accordingly. What a cybercriminal wants is largely two-fold; To get access to your existing financial accounts, or to open new credit lines in your name that you don’t know about. Protecting against the first comes from personally monitoring your bank, investment and credit card accounts for suspicious activity. If you deal with an institution that carries insurance such as FDIC or SIPC or others, then losses will largely be protected against. (check with your institution for specific guarantees)
 
To protect against unauthorized credit lines, I highly recommend employing a credit monitoring service of some sort. These are designed to alert you anytime a credit line is opened, allowing you time to notify the institution if it was unauthorized. Some people don’t want to pay the monthly fee. I am reminded that when I grew up I don’t think my parents even had a key to our house. It was certainly never locked. Today it would be unreasonable to not pay for good locks and even security systems to protect our homes. Today, your greatest financial assets are generally not kept in your home, such as your good name and credit rating. It would be unreasonable to not spend the money and effort to protect those assets.
 
Governments and institutions spend enormous money to protect your personal information, but all their efforts cannot, and never will, be a perfect solution. In this digital age it is critical that individuals make the effort to monitor their own personal situation so that when a theft occurs, they will know about it and can act to protect themselves. Cyber thieves thrive on those who don’t pay attention. Don’t be that victim.