Category Archives: Quarterly

12 Questions That Will Change Your Financial Life

How well do you really know yourself and your relationship with money?

by Matt Topley

Key Takeaways

  • When it comes to your money outlook, you tend to be influenced by the five people you spend the most time with.
  • Commit to being a lifelong learner about personal finance and personal fulfillment. There’s a strong correlation between the two.
  • Don’t let your emotions get in the way of a sound financial plan—or life plan.
  • Be brutally honest with yourself about what’s most important in life. Eliminate distractions that prevent you from putting your energies where they truly belong.

Going through my summer reading pile the other day, I came across a great article by Ryan Holiday, called “12 Questions That Will Change Your Life.” Holiday, author of the best-selling book Ego is the Enemy, wrote 12 Questions for a general audience, but I’ve found they can be applied to investing, wealth accumulation and wealth preservation, too. You don’t have to read these provocative questions in order, but do yourself a favor and give each one some thought:

Q1. Who do you spend your time with? According to motivational speaker and business guru, Jim Rohn, we are the average of the five people we spend the most time with.

It’s been proven time and time again that people are the product of their environment. If you spend your time around people who constantly complain about money, who degrade rich people, who see money as the root of all evil or who will do anything to avoid a conversation about finances, then you’ll have a lower probability of growing your wealth than if you spend your time surrounded by people who have a healthy relationship with money.

That doesn’t mean you have to champion the “Greed is Good” philosophy made famous by Michael Douglas in the 1987 classic “Wall Street.” But, think about your closest friends and colleagues. Do they seem to have a positive relationship with money?  Do they inspire you to grow your net worth and pursue financial freedom by way of example? On the other hand, if your closest friends and colleagues are willing to accept an unhappy financial lifestyle, they will most likely endure an unfulfilling family and work life.

Q2. What does your ideal day look like?  One of the biggest benefits of financial freedom is that you can live your life on your terms—not on someone else’s terms. But if you don’t know what your ideal day looks like (both a workday and a weekend day), then how do you expect to experience it on a regular basis?  It’s important to take inventory of your financial life.  One of the best ways to do that is to spend a few hours a week increasing your financial literacy. It’s not about learning how to be a better stock picker. It’s about learning how to boost your career skills or starting a side business that can substantially boost your income.

Before diving in, it’s important to know how you learn best. Do you learn best by reading, by listening or by watching?  Whichever channels works best for you, spend an hour a day on it building your career skills and financial literacy.  Surely it’s worth devoting 60 minutes a day to something that will lower your stress and increase your pursuit of self-actualization.

READ: Barron’s, Wall Street Journal and Topley’s Top 10 blog.
LISTEN TO: Behind the Markets (Wharton Business Radio) and Barry Ritholtz’s Masters in Business podcast (Bloomberg)

Q3. To Be Or To Do?  Legendary Air Force colonel, John Boyd, used to ask trainees: “To be or to do? Which way will you go?”  Boyd wanted to know if the new recruits would be focused on the pursuit of success or choose to focus on a higher purpose?

The goal of financial freedom is not to acquire big houses, fast cars or expensive bling. It’s about acquiring the freedom of time so you can enjoy life and pursue a higher purpose. Finding a higher purpose takes time and contemplation. If you are just scrambling to pay bills all the time, you are not in a position to be thinking about your higher purpose in life. The stress hormone cortisol is public health enemy No. 1 and research shows that a sizeable percentage of Americans suffer from financial anxiety (see Question 12). Real tangible accomplishments happen only when your thinking is sharp and free of stress and distractions.

Q4. If I Am Not For Me, Who Is?  If I Am Only For Me, Who Am I? The alternative translation of that last part is “If I am only for me, what am I?”  The answer is “the worst.”  It doesn’t make you a bad person to want to be remembered, or climb to the top of your profession, or focus intensely on providing well for yourself and your family.  But, if this is ALL you want from life, then that’s a problem. Many successful people have strong gos and are driven by self-interest, pride, dignity and ambition–but they temper those traits with a sense of humility and selflessness.

Warren Buffett, no stranger to success, said that “Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”

I love Buffet’s quote and recently wrote a paper based on it (Investing Is a Psychology Game, Not an IQ Game). If you’re not careful, ego can be your greatest enemy in both investing and in life. Temper your investing life with a sense of humility and simplicity. This will give you the time and money for selflessness. Improving your personal financial life give you the time and money to change the world in a way that is most meaningful to you.

Q5. What Am I Missing By Choosing To Worry or Be Afraid? In his book, The Gift of Fear, Gavin de Becker suggests that when you worry, you should ask yourself: “What am I choosing NOT to see right now?”  What important things am I missing because I choose worry over introspection, alertness or wisdom?”

Obstacles in our financial lives make us emotional. The inability to keep our emotions in check is what often destroys net worth and can lead to fractured personal relationships and stunted careers.

Don’t let the stock market’s fickle gyrations fool you into making bad decisions. Don’t let Wall Street pundits and the financial media scare you with attention grabbing headlines.

When it comes to investing, things are never calm for long. Over the past 70 years, the S&P 500 Index has experienced twelve separate corrections of at least 20 percent. That’s an enormous amount of wealth wiped out in a relatively short time. But despite those frightening reversals, the index has gained a stunning 15,000 percent over that seven-decade time frame. Those who stayed invested and who didn’t try to get in and out of the markets have been handsomely rewarded for their discipline.

Meanwhile the average U.S. investor is barely keeping up with inflation (Sources: Richard Bernstein Advisors LLC, Bloomberg, MSCI, etc.). Why is it so hard for individual investors to keep up with inflation, let alone the unmanaged market index? Because many make emotional decisions at the wrong time—again and again!

The Greek word “apatheia” refers to the equanimity one gains when you are free of irrational fear and extreme emotion. Apatheia is one of the keys to successful investing and paves the way to a state of flow in your personal financial life. A fulfilling life revolves around doing meaningful work and having meaningful relationships. A stressful personal financial situation can destroy your ability to enjoy your work and relationships.

Q6. Am I Doing My Job?  The last thing that legendary college basketball coach, John Wooden, said to his players in the locker room before every game was: “Men, I’ve done my job; the rest is up to you.”

You may not be part of an elite basketball program or Fortune 100 company, but ask yourself if you are really doing your job each and every day? Remember, you can be extremely busy—working to the point of exhaustion–and still not be doing your job. You cannot be the best at your job when you are scrambling to pay the bills, fighting with your spouse over money matters, or envying a co-worker you think is more financially successful than you are. To operate at your highest level for career advancement, you must be in a state of mental flow. This flow state can only be reached when distractions are kept at a minimum. A healthy financial plan will limit distractions from many areas of your life—not just the money ones.

Q7. What Is the Most Important Thing? If you don’t know what the most important thing in life to you is, then how do you know if you’re putting it first? If you have personal financial stress, you will never have time or mental energy to focus on what’s most important to you because you will be constantly distracted by the negative weight of your money burdens. However, once you put your financial house in order, you will develop the quiet confidence to succeed in all aspect of your life. Seneca, the ancient Roman philosopher called that quiet confidence “euthymia”– the belief that you’re on the right path and that you won’t be led astray by people who are hopelessly lost.

Q8. Who Is this for? It doesn’t matter if you’re making something, selling something or trying to reach people, you have to know who your audience is. Great speakers, great politicians and highly creative people tend to have a good sense of who their target audience is. So can you.

Creativity is the key to self-improvement and career growth. In order to be creative you need to generate a LOT of ideas. They won’t all be winners, but you need a clear mind and long periods of uninterrupted thinking time to come up with a diversified portfolio of potential ideas so you can consistently develop good ones. Clearing your mind of financial worries and other distractions is the key to getting into your flow state—a mindset in which you do your best thinking and achieve real breakthroughs.

Q9. Does this Actually Matter? Given the shortness of life, does this thing I’m thinking about, worrying about, fighting about, throwing myself into even matter?  Sadly the answer is usually no.

As Coach Wooden always told his players: “Learn as if you were to live forever; live as if you were to die tomorrow.”

If nothing else, don’t get stressed about short-term market volatility and the media hysteria around it. All that matters is your long term financial plan and preserving wealth for yourself, your family, your heirs and the causes you support. As get older, I realize more and more that money is simply a tool for making the most of our brief time on earth. Making money for the sake of making money’s will just keep you on the hamster wheel forever.

“You could leave life right now,” the second century Roman emperor, Marcus Aurelius reminded himself, “Let that determine what you do and say and think.”

Q10. Will This Be “Alive Time” or “Dead Time?” At the end of the day there are only two types of time: Dead Time and Alive Time. Dead Time is when we are just waiting and Alive Time is when we are learning and active.

Resist the temptation to get distracted by Wall Street pundits. Don’t let them sway you into chasing the next hot stock or sector. Don’t let them talk you into getting in (or out of) the markets at EXACTLY the wrong time (see danger of market timing in Question 5).

Case in point
: During a recent eight-day span, research found that the big three cable news networks had over 600 stock market pundits on the air—that’s about 75 different “talking heads” tugging at your ego and emotions every day. Behavioral finance research proves how hard it is to predict markets accurately, but still we are exposed to thousands of gurus a month through conventional and social media. Use your Alive Time to become a smarter investor, to get better at your profession, to become a better parent, to read and to exercise regularly. Don’t allow your Alive Time to become Dead Time by trying to predict the unpredictable (think weather, stock market, natural disasters or traffic accidents, etc.).

Q11. Is this Who I Want To Be? Our minds have a unique ability to make the distinction between what we do and who we are. The problem is you can’t be a good person if your actions are consistently bad. People make bad decisions when they’re under fiscal duress, often falling into what we call “the triangle of corruption:
Need + Justification + Opportunity.

Unfortunately, sociopaths aside, the triangle is where people get themselves into trouble. By keeping your financial house in order, you can prevent the triangle from swallowing you up. You are what you do. Regardless of what you happen to be doing, always ask yourself, “Is this reflective of the person I want to be?”

Q12. Man’s Search for Meaning. Viktor Frankl, a renowned Austrian neurologist and Holocaust survivor, said life demands that we always answer the question, “What Is the Meaning of Life?” He said we answer that existential question with our actions and decisions.

After examining 65 studies on debt and mental health, researchers from the University of South Hampton concluded that people in debt are three times as likely as those who are debt-free to have a mental health problems. Those problems can range from drug and alcohol dependence, to depression, anxiety disorders and psychotic disorders. That’s a scary statistic considering that more than one-third of Americans have delinquent debt according to the Urban Institute.


Surround yourself with people who have a positive outlook on life and a healthy relationship with money. Control what you can control and let everything else go. Finally, if you are to find the meaning of life in your actions and decisions, then debt and financial worries are clearly things to avoid at all costs.

About the author

Matthew Topley is the Chief Investment Officer of Fortis Wealth in Valley Forge, PA and a 2018 winner of the Philadelphia Inquirer “Influencers of Finance” award. He authors the daily blog Topley’s Top 10.


Fortis Advisors is a wholly-owned subsidiary of Fortis Wealth and is a registered investment adviser with the Securities & Exchange Commission.

This presentation outlines research and is not an offer to sell or a solicitation to buy any securities. This is intended for the general information of the clients or potential clients of Fortis Wealth. Any investment information does not consider the objectives, financial situation or needs of individual investors. Before acting on any advice or recommendation in this material, a client must consider its suitability and seek professional advice, if necessary.

The material contained herein is based on information we believe to be reliable, but we do not represent that it is complete or accurate, and it should not be solely relied upon as such. Any opinions or suggestions as of the date written may change without prior notification.

No part of this material may be copied or duplicated in any form by any means and may not be redistributed without the consent of Fortis Wealth.

If you would like to receive a copy of our Form ADV Part 2a or any other information,
please contact Matt Topley at, or call (610) 313-0910.

Additional information about Fortis Advisors is also available on the SEC’s website at

There’s Still Time to Take the Road You’re On, but It’s No Guaranteed Stairway to Heaven

“There’s still time to change the road you’re on”

Led Zeppelin

‘Stairway to Heaven’


Stairway to Heaven

Led Zeppelin

There’s a lady who’s sure
All that glitters is gold
And she’s buying a stairway to heaven
When she gets there she knows
If the stores are all closed
With a word she can get what she came for
Oh oh oh oh and she’s buying a stairway to heaven

Key Takeaways

  • Just four stocks have accounted for 84 percent of the S&P’s upside in 2018.

  • Defensive sectors account for a historically small part of the S&P’s current market cap.

  • The large gap between growth and value stocks is not sustainable long-term.

  • Growth stocks have outperformed value stocks for extended periods six times since 1945….each time, that run was followed by a significant recovery in value stocks.

  • Even if the yield curve inverts, there should be plenty of opportunities for savvy investors.

The first chart to start this quarter’s letter looks more like a stairway to hell. It depicts the composition of traditionally defensive sectors (utilities, telecom, pharma, consumer staples) as a percentage of the S&P 500 index. Representing a record-low 11 percent of the index’s total market cap today, defensive sectors have sunk below levels last seen during the internet bubble era of early 2000.

In my early adulthood, it was a safe bet that you were staying out too late when the rock classic “Stairway to Heaven” came on the bar’s sound system at closing time. But, as an almost-50 year old reading Led Zeppelin’s iconic lyrics today, I can see why “Stairway to Heaven” is a perennial fixture on classic rock Top-10 lists.

As longtime advocates of sector rotation, you could say our firm’s investment philosophy is driven by the Zeppelin refrain: “There’s still time to change the road you’re on.

Throughout my Firm Letters over the past three years, I have defended the bullish case against Trump election doomsayers, mini-bubble procrastinators and comparisons to the 1999 tech crash.  However the conclusion of my Q4 Letter of 2017 (It Ain’t Over, but the Fat Lady is Warming Up) hinted that the bull market was entering its “euphoria stage.” And now in the second half of 2018, it’s clear we are seeing a historically large spread between growth stocks and value stocks.

As tech weightings in indices move higher, defensive sectors are halved

Equity markets: The relative weight of defensive stocks (such as utilities) in the S&P 500 continues to trend lower. As you can see in the chart below, there has been a clear break through the Internet Bubble lows of 2000.

The last time we saw such a giant gap between defensive sectors and the rest of the market, that spread was erased quickly during the unraveling of internet stocks at the beginning of this century. Unlike the dot-com era, we do not have a rampant IPO market of zero-revenue “story stocks” today, but we do have massive gaps such as FAANG stocks (Facebook, Amazon, Apple, Netflix and Google) outperforming traditional value sectors by over 700 percent during the last five years.

As some of you may know, I started my trading life in 1997 at an earnings momentum shop that focused on tech stocks. My introduction to Wall Street was trading tech stocks and other high growth sectors during the internet bubble. As mentioned in my past letters, we are not experiencing anything like the internet bubble today. If anything, that risk is found in the venture capital and private equity world today, not in the hands of public market investors. However, we are experiencing a historically large spread between value stocks and growth stocks that will eventually revert to the mean.

The last giant gap between growth and value stocks

When gaps between growth and value form like they did during the dot-com boom (see chart below), they are reflected in valuation spreads.

Spread between growth and value hitting record highs

 2007-2017 Russell 1000 Growth +182% vs. Russell 1000 +96%

Right now, U.S. growth stocks are trading at a 59-percent higher price-to-book ratio than U.S. value stocks are, and they’re trading at a 67-percent premium to U.S. small cap value names.

The largest spread right now is an almost 80-percent price-to-book premium for U.S. growth stocks over emerging market value stocks. The majority of capital asset pricing models (CAPM), which are strictly math-based, predict that emerging markets will be the highest performing asset class for the next 10 years–if you can stomach the volatility. Emerging market valuations are relatively cheap and middle class growth projections are positive, but debt levels in U.S. dollars are high, hence the recent 20-percent correction around a 7-percent rally in the U.S. dollar relative to other currencies.

Source: Vanguard

During my early trading days in the late 1990s, there was talk about a new world order in which value-oriented Benjamin Graham advocates were no longer relevant. Today there’s talk about a new world order in which technology-driven whiz kids will dominate the markets. Artificial intelligence, robotics, internet of things, intelligent agents and virtual reality are all part of the “fourth industrial revolution” that is changing the world. But, as often happens, there may be far more losers than winners in this race to the top.

As the market continues to narrow and a small number of names drive all the alpha, you start to hear comments like these from new world order investors:  Value investing is a lost cause.  That’s not surprising when just four high-flying tech stocks–AMZN, MSFT, NFLX and AAPL–have been responsible for 84 percent of the S&P’s entire upside for the year-to-date.

But, as Barron’s predicted in March, the big valuation gap between growth and value funds indicates a value comeback.

Growth manager vs. value manager

On the other side of the aisle is mid-cap growth fund manager Michael Lippert, who has a 7 percent weighting in Amazon (AMZN) in his $308 million Baron Opportunity fund (BIOPX). Value investing is a lost cause in today’s high-tech, winner-take-all economy, according to Lippert. “The world we live in today—is haves and have-nots, and there are way more have-nots,” he said. “There are so many industries being disrupted by the digitization of the world; it’s hard to make cyclical bets on have-not value stocks.”

Those conflicting viewpoints have led to a stark contrast between the valuation of Baron Opportunity’s and Heartland Value’s portfolios—and their respective performance. According to Morningstar Direct, Baron Opportunity’s stocks have an average trailing 12-month price/earnings ratio of 42, compared to Heartland Value’s 7. Baron Opportunity’s five-year annualized return of 14.2 percent is double Heartland’s 7.1 percent. Small wonder, as market darlings like Amazon, Alphabet (GOOG), and Tesla (TSLA) dominate Lippert’s portfolio.

Bloomberg ran a story last year about Goldman’s Death of Value Investing report. Just last week, Barron’s ran an article about the demise of value investor David Einhorn: “For ‘King David’ Einhorn, a Steep Fall.”

Headlines like these remind me of late 1999 when Barron’s asked: “What’s Wrong, Warren?” The article suggested that legendary value investor, Warren Buffett, was losing his magic touch. During the 20-month period ending in February of 2000, the Nasdaq was up 145 percent, while Buffet’s Berkshire fund was down 44 percent — a mind-bending 189 percent streak of underperformance for the Oracle of Omaha, at least compared to Nasdaq’s growth-oriented technology stocks.

My good friends at Alpha Architects explained why. Growth stocks have outperformed value stocks for extended periods six times since 1945….and each time, that run was followed by a significant recovery in value stocks. Timing this rotation is impossible, but we are getting close to record spreads in valuations with interest rates rising and unemployment at record lows.

Growth has outperformed value six times since 1945

Many believe that an inverted yield curve, in which short-term interest rates are higher than long-term rates, is a reliable indicator of a forthcoming recession. The difficulty with the inverted yield curve is that stocks tend to do really well when the curve flattens, as is the case today. Stocks also tend to do well shortly after the curve inverts. But, today the defensive sectors that are lagging now have huge outperformance in a down market.

We highlight quickly that none of our 5 recession indicators are flashing yellow or red…Then discuss how momentum is a sector/asset class rotation strategy

Chart shows sector performance when yield curve inverts (Fortis #1 recession signal).  Even in recessions, the sector divergence is striking.  The past 4 defensive periods show healthcare and consumer staples outperforming the S&P 500 Index by 40.5% and 33% respectively.


The difficulty with reversion to the mean is that you can go broke waiting for market to express itself fundamentally back toward value.  Right now, our five recession indicators are all green with none showing signs of an imminent implosion. What’s more, our technical momentum indicators all point to U.S. growth stocks maintaining leadership.

At Fortis we believe in evidence-based academically-backed research. With this philosophy leading our investment thesis, we conquer the challenges discussed in this Letter by combining momentum stocks and value stocks. The reasons behind this strategy require a much longer discussion, but please feel free to contact me any time (610-233-1074) to discuss in more detail.

In the end, there are “two paths you can go by” in market-growth or value. Right now we are experiencing historic spreads between the two. As has happened throughout history, the new pundits arrive singing the death of one path–in this case value–due to the permanent triumph of the other, in this case growth.

Remember back in 1999 when the “talking heads” were predicting the end of Warren Buffet’s value strategy? Remember after the 2008 crash when the S&P hit a generational low 650 and the same talking heads were predicting the end of growth in America?  The Stairway to Heaven for the last decade has been growth stocks, but every elevator has a top floor.

As Warren Buffet likes to say, “Predicting rain doesn’t count, building Arks does.”

If there’s a bustle in your hedgerow
Don’t be alarmed now
It’s just a spring clean for the May queen
Yes, there are two paths you can go by
But in the long run
There’s still time to change the road you’re on
And it makes me wonder

Stairway to Heaven

-Led Zepplin

Topley’s Top 10 – July 12, 2018

1.The Ultimate Question-Can Earnings Keep Rising?

Can Companies Keep Up Strong Beat Rates in Q2 Earnings Season?
Jul 11, 2018

One thing we’ll be watching closely this earnings season is whether companies can keep up the extraordinarily high beat rates seen over the past two quarters.

Over the past two earnings seasons, even though analysts had to up their estimates quite a bit due to the Trump corporate tax cuts, companies were easily able to beat expectations.  Since 1999, 62.1% of earnings reports have reported EPS that were greater than consensus expectations.  As shown below, though, the last two quarters saw much higher than average beat rates.

Not only have bottom line EPS beat rates been strong, but top-line revenue beat rates have been strong as well.  Revenue beat rates over the last two earnings seasons were higher than any quarter since Q4 2004.

The chart below takes the average of each quarter’s earnings and revenue beat rate.  When looking at the strength of both the top and bottom line beat rate each earnings season, the only other two-quarter period that showed stronger beat rates than the last two quarters was back in Q4 2003 and Q1 2004.

Needless to say, investors have gotten used to stronger than expected earnings reports over the last six months.  If companies aren’t able to keep up the pace this season, we think the market will struggle.

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Topley’s Top Ten – April 11, 2018

1.Interesting …Not Sure If Tech Fits this Bucket

“Tobacco (1992), financial (2010), biotech (2015) industries illustrate how waves of regulation can lead to investment underperformancenoted BofA – “As Facebook has grown, people everywhere have gotten a powerful new tool to stay connected to the people they love, make their voices heard, and build communities and businesses,” Mr. Zuckerberg says, in prepared testimony released by a House committee on Monday. “But it’s clear now that we didn’t do enough to prevent these tools from being used for harm as well.”

From Dave Lutz at Jones

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