There are lessons learned in the vegetable garden that you can apply to your investment portfolio. And lessons learned from investing that you can apply to your garden.
The Joy of Gardening
The Joy of Gardening
I used to have a manager who said that gardening was simply a way to spend $50 to save $1.14 on buying tomatoes. Clearly (at least to me), he never had a garden.
In the beginning
I enjoy gardening. Throughout winter I love planning my garden. And in the spring, I look forward to getting my hands dirty and weeding and planting. And then, well then, usually life gets in the way before the garden really starts producing.
The problem is that all the prep work that happens is only half of the process. It’s the part that I plan for all winter long. As soon as it’s warm enough I am out there cleaning up the garden, spreading compost, and fixing fences. And then I’m planting. And to a large degree, I can do that on my own schedule – yes, it must be done in the spring, but there are many spring weekends. I can clear everything from my calendar for a spring weekend and plow through it (pun intended).
The other half of the process doesn’t happen on my schedule. Weeds grow when they grow. If I’m away for a couple of weeks, they can be very well-established when I return. Finding time to get out there and pull those weeds while continuing to run my business and family doesn’t always happen. The weeds suck up the nutrients from the soil that I so carefully fed in the spring and then they overpower my vegetables.
And sometimes it isn’t a weed that tries to take over but something like over-zealous pumpkin vines. One summer we had pumpkin vines that seemingly spread everywhere. They climbed into the apple trees and it looked like our apple trees were growing pumpkins. They spread into the lawn at both ends of the garden. They became the biggest plants in the garden and produced so much shade that little else grew.
And then, a critter came and cut off that pumpkin vine right near its base. The huge flourishing vine was wilted and dead within a day. We had pretty much let the pumpkin vine take over because it seemed so healthy and it was exciting to see what it could do, but in the end, it didn’t produce anything we could eat.
Your garden and your portfolio
So what does this have to do with building wealth? The same thing can happen to a portfolio.
In the beginning
We go to work and earn money. That’s the beginning – like spring in the garden when we prepare the soil. We plant with the expectation of growth – much like investing. And we feel like we’ve done the tough part. We’ve done the part that required us to take definite, prescribed steps. And we feel pretty good about our work and have great expectations for a bountiful harvest – just like our investing.
Many people even keep up with the ongoing work – weeding and feeding and monitoring the garden or the portfolio. The trouble comes when they get behind – and say one element gets out of balance. Or something doesn’t go according to our projections. There’s some anxiety. In some cases, there’s some shame because we feel we let things get out of hand. And in other cases, there’s elation because we feel responsible for having chosen so well (that outperforming stock in the portfolio or the perfect pumpkin seed).
What about the plan?
And we forget that, in the planning stage, we intentionally crafted a diversified garden or portfolio in case something goes off plan. We considered the possibility that something could go wrong and we prepared for it by not putting all our eggs in one basket. We determined how much we could stand to lose if a blight struck the tomatoes and made sure that there were other vegetables to eat just like we allocated only a specific portion of our portfolio to the technology sector in case there was a downturn in technology. By letting one element of the plan overshadow the rest, we allow the whole thing to get out of balance.
If you have one player that has grown too much, you’ll need a plan to get your garden or portfolio back in balance – trimming back and then planting new plants or beefing up other areas of your portfolio. It will probably take some time to execute your plan to regain balance, and during that time you’ll live with the anxiety that something awful could happen to your star performer.
If your star performer does collapse, you lose progress towards your goals – whether it’s food or money. More importantly, you’ve lost time. Yes, you can start again. You will likely have learned a lesson or two from your experience. But you can’t get that time back. You can’t grow a new crop of pumpkins or tomatoes until next year. And you can’t put new money to work until you earn more. Until then, you’re losing time that you thought your portfolio would be working for you.