The mountaineers “Essential 10 Checklist” is seared into the memory of every serious hiker and climber. Why? Because it may literally determine life or death. Similarly, every investor's financial life or death is determined by what I am calling the “Investors Essential 10 Checklist”.
Both checklists are comprehensive. Both checklists suggest that forgetting any one of the ten can kill you. So put-on your investor’s hat and your hiking boots, and let me take you through these checklists for the sake of your well-being, safety, survival and future financial prosperity.
Item #1: Navigation
- Mountaineers need a map, a compass and GPS. Don’t leave home without these.
- Similarly, investors need a written trading plan. Having an understanding and appreciation of the 10 essential stages in our book, Tensile Trading, would help. Then, having an organized assortment of ChartLists (such as the Tensile Trading ChartPack) will increase your probability of both profitability and survival.
Item #2: Sun Protection
- Mountaineers require sunscreen, sunglasses, lip balm and a hat or helmet.
- If investors are not going to get burned, they require a personalized sell strategy. Understanding their own “uncle point” or the amount of risk they can personally tolerate is necessary to address before you invest. In the midst of a market correction is a disastrous time to start trying to understand your “investor self” and begin formulating a rational sell strategy.
Item #3: Insulation
- Mountaineers must be shielded from rain. Waterproof boots, jackets, gloves and hats are non-negotiable. Gore-Tex is your friend.
- For investors, diversification is your Gore-Tex and will keep you dry. A carefully balanced portfolio will weather all storms and financial curves the market throws at you.
Item #4: Illumination
- In the great outdoors when the sun goes down, mountaineers need a dependable flashlight and/or headlamp, along with extra batteries.
- For this investor, my illumination comes from my charts. They never lie to me. When I am willing to listen objectively to what they are telling me, I am seldom in the dark with respect to my portfolio and my positions.
Item #5: First Aid Supplies
- Regular hikers know that accidents happen, scrapes, cuts and injuries are the price of admission. So they come prepared.
- Investors, too, must appreciate that money management is all about probabilities. You can shift them significantly in your favor, but never to the point of avoiding losses completely. Financial cuts and scrapes will happen. The personal trading journal that I keep provides a sort of first aid station for me. It’s where I absorb and analyze the lessons the market has taught me and from which springs my financial healing and personal growth.
Item #6: Fire
- Experienced mountaineers will always carry matches or lighters in a waterproof container to make sure that they can start a survival fire in emergencies.
- With investing, the fire metaphor works in the inverse. The emergency results when one’s personal investing fire goes out. I manage to stoke the investing fire in my belly by being an active market participant — teaching, reading and spending time with like-minded investors. Whether you are a hobbyist investor or a full-time investor like myself, if you get bored with the markets, then you should probably take up bungee jumping or heli-skiing instead.
Item #7: Repair Kit and Tools
- Every serious hiker I know has their own favorite Swiss Army knife. First invented in the 1880s, there are now probably over 100,000 variations of this all-important tool. Of course you stash it in your trusty backpack, along with duct tape and other repair essentials.
- The investors’ equivalent of their favorite Swiss Army knife is their personal methodology. In our book, I outline my “Battle V” methodology. It’s both my essential tool and my repair kit. I’d never consider investing without it. An investor who can’t explicitly describe his or her personal methodology likely doesn’t have one. And that’s dangerous. I’m happy to lend you mine.
Item #8: Nutrition
- Energy bars and snacks are standard fare in every hiker’s backpack. An extra supply of food for an unexpected extended stay is simply common sense.
- An an investor, my nutrition comes in two flavors. Since I’m a full-time trader, the obvious sustenance that I receive is in the form of financial nutrition. These past 25 years have exceeded even my wildest dreams. The second flavor, if you will, is my need for nutrition to feed my neurons. Intellectually, I feed on the market. It’s alive — always stimulating and challenging me to grow as a person and a money manager. My experience, coupled with the ongoing intrigue of constantly optimizing my portfolio, helps keep me young.
Item #9: Hydration & Sanitation
- I’ve been struck by the number of small ingenious devices now available to mountaineers that let them treat water and render it safe to drink. There’s no reason not to carry this obviously essential accoutrement. It may save your life.
- My hydration as an investor comes from fulfilling a strange personal need that I’ve had all my life. I love competition. I love fast powerful cars. I like to feel my palms get a bit sweaty. I cringe if you call me an adrenaline junkie, but I love the challenge of exciting pursuits while emotionally tempering the adrenaline. It’s a strange need I have to balance the two, but I know myself now after all these years.
Item #10: Emergency Shelter
- Every responsible mountaineer takes this seriously. A tent, a tarp or a reflective blanket are must-have gear. Most also carry a whistle, cell phone and binoculars. Some will carry a shovel.
- As an investor, I have both emotional shelters as well as financial shelters. I’ve spent many years working diligently to understand and control my investor self. Before I enter any position, I formulate both bullish and bearish scenarios so that emotionally, my sell strategy will be easier to execute. It’s much less stressful this way. With financial shelters, I have certain money management rules from which I never deviate. Never! I do not use leverage. I’ve heard all the sermons about improving my performance if only I’d use leverage, but I won’t. It’s a psychological rule with me — similar to my rule not to short the market. I don’t want to be pessimistic. My financial shelter also means that I always maintain a comfortable monetary buffer, which is a combination of cash equivalents and liquidity.
So there you have it! To ensure that you both enjoy and survive your pursuits — be they mountaineering or investing — you must embrace these ten iconic time-tested essentials. Ignore any at your peril. In both endeavors, there will be times when you’ll have to respond positively to the unexpected. Your survival checklist must be tailored to your specific adventure. Nevertheless, it will act as your insurance policy to stay safe, stay alive and have fun whether hiking or investing.
Trade well; trade with discipline!
- Gatis Roze, MBA, CMT
- Author, Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016)
- Presenter of the best-selling Tensile Trading DVD seminar
- Presenter of the How to Master Your Asset Allocation Profile DVD seminar
- Developer of the StockCharts.com Tensile Trading ChartPack
About the author:
Gatis Roze, MBA, CMT, is a veteran full-time stock market investor who has traded his own account since 1989 unburdened by the distraction of clients. He holds an MBA from the Stanford Graduate School of Business, is a past president of the Technical Securities Analysts Association (TSAA), and is a Chartered Market Technician (CMT). After several successful entrepreneurial business ventures, Gatis retired in his early 40s to focus on investing in the financial markets. With consistent success as a stock market trader, he began teaching investments at the post-college level in 2000 and continues to do so today.
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