Lessons from my Career


There are certain investing fundamentals that will never go away and no matter the environment we find ourselves, these fundamentals will always shine through.

It has been a bit of a roller coaster ride since 2002 when I first entered the industry. Lets face it, 2 stock market declines in excess of 50% in my first 7 years in the industry is like hoping on a rollercoaster for the first time. Thankfully I was surrounded by a good team and understood the fundamentals of long term investing very well. None the less, the start to my career aged me fairly quickly. The last 7 years mark the calmest 7 of my career by a long shot and are certainly much appreciated. Of course, a few years older, now I look at some much younger managers whom have never experienced the ride, let alone 2 wild rides and wonder if they are prepared and understand the fundamentals that will lead to long term success. Just like a rollercoaster, you never really know how you will react until you experience it!

The simple things are also the most extraordinary things, and only the wise can see them.

-Paulo Coelho

By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest.


I thought it would be great to summarize a few of my career lessons and perhaps some wisdom:

1. Stocks are risky

I suppose it depends on your view of risk. If you look on a yearly basis then Stocks are very, very risky. Any given year could land you with 20,30 50% declines for stocks or stock funds / ETF’s you own. However, you will win in the long run if you can just ignore the short term and wait patiently for 10+ years. Usually it does not even take that long, but if you started at the peak in 2007, you likely had to wait until 2011 to just get back to breakeven and 2014 before you felt your reward for owning stocks. Waiting 7 years to see your plan be on track takes real patience.

2. Stocks will win

Stocks are built on owning companies, companies are built on using bonds and bonds are built on the backs of monetary policy which is built on back of capitalism. Assuming capitalism still exist in some form and people want to make money and desire goods then the monetary system will be supported. If monetary policy continues to exist, the government continues to be in place and we continue to use our banking system and believe in our system then bonds will exist and be secure. If bonds exist then stocks and companies will have ability to pursue improving capitalism by delivering goods and services people want. It is a wonderful connected circle. While it bends at times, it all exist connected. Stocks are at the top and offer the highest level of returns because, well, they offer the profits back to people rather than set interest. If any part of the basis of capitalism is completely broke then all of the areas will suffer the same fate. Cash, bonds, stocks, government, employment would all cease at equal amounts if a permanent dooms day scenario happened. Otherwise we simply see temporary halts and imbalances occur which always reset with stocks winning long term.

3. Bonds reduce risk

High quality bonds are the best shock absorber for short-term risk and volatility. For those who desire less downside and improved stability, high quality diversified bonds offer the best way to counter short term declines. Yes, even in periods of large rising rates bonds will offer a good risk reducer. As rates increase older bonds mature and you get the newer higher rates. Done properly you may feel some added volatility during rising rates and it may drag total return a bit short term, but they will still provide the risk reducer you need while generating some consistent income.

4. Alternatives are Fools Gold

Remember how smart the managers at Yale and Harvard were in 2007 for using alternatives to reduce risk and still get good upside. If not, that’s ok, just know these really fancy pants nerds developed super complicated algorithms using alternative investments that would allow a portfolio to have less risk and still get closer to stock market returns. This worked great when markets where stable but then came 2008. Guess what happened? They all declined as much and some more than stocks. Refer to my second point for how everything is connected. No alternative investment can buck the trend of risk and reward. They may show less correlation in stable times and are great for slick salesman to act fancy with short term numbers but when stuff hits the fan you either own the risk of stocks, bonds, or cash and alternatives generally fit into the stock risk category in times of stress. Another example that takes little explaining is Collateralized Mortgage Obligations. In 2007 these were being sold as alternative investments having little tie to the stock market, with risk equal to bonds and generating 7-9% yields and return. Too good to be true? You bet! They collapsed and some caused the 2008 crash. By 2009 people realized they were MORE risky than a good diversified stock portfolio. Bottom line ……… alternatives can be fools gold!

5. Emotions are the enemy

What leads to investor success? Having the perfect portfolio, the perfect plan, the perfect advisor, the best manager, the lowest fees? Nope. These are important but make up a small part of investor success. Some of our most successful clients started out by simply setting up a 401(k), contributed a set amount each month, put in a stock market fund which they knew very little about and left it alone for 30 years. Then, when they got around to finally caring about things it had grown to an exorbitant amount and well exceeded all the goals with no planning or thought. They confess in shame as they show us and ask our opinion for retirement. I chuckle and explain they unintentionally did all the right things. Ironically, I see this strategy as being more successful more often than those who intentionally try to do the right things and through that process unintentionally do all the wrong things. Investors who engage in constant planning, constant reviewing can fall victim to emotional traps. When things decline, they are so busy checking things out they become more concerned and emotional. When things increase they expose themselves to possible greed. This can cause erratic behavior in selecting improper long term investments that will meet specific goals and objectives. Often these emotions cause investors to chase returns or hot stocks (alternative, CMO’s, Tech Stocks, etc…) or cause them to move to cash or bonds at the wrong time out of short term fear and misunderstanding (2002, 2008). The real enemy for all investors, public enemy number 1 is EMOTION.

Final Takeaway

Successful investing and planning remains fundamentally the same. Set a goal. Own a basket of solid companies, own a basket of quality bonds, mix together for your risk level, ignore the fancy and complicated stuff, set it and forget it. Evergreen Wealth Management is as much about helping you avoid the traps as it is about helping form a plan and making the best investment decisions. We feel we do a great job at both, but often we overlook our contribution of what to avoid is equally important as how to invest. Thankfully you are hiring Evergreen Wealth not for our actions today, but for our vast accumulated experience in understanding how to avoid making the wrong decision and instead make the decisions that will meet your long-term objectives.

Evergreen Wealth Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.