Spring is here. If you’re a gardener, you know it will soon be time to put in your flowers or vegetables. But even if you don’t have a green thumb, you can still take advantage of the season by “planting the seeds” for the growth of another valuable piece of property: your investment portfolio.
Actually, you can find a few similarities between successful gardening and effective investing. For starters, both gardeners and investors need to consider their individual circumstances. If, for example, your garden is in a shady part of your yard, you might be able to grow some nice geraniums, but you’ll have a tougher time with roses, which crave the sun. As an investor, you’ll also find that some investments are more appropriate for your situation than others. So before you purchase a stock, bond, certificate of deposit or government security, you’ll need to determine if it’s suitable for your risk tolerance, time horizon and long-term goals.
Furthermore, just as gardeners don’t usually grow only one variety of flower or one fruit or vegetable, as an investor, you shouldn’t stick with one type of investment vehicle. If you own nothing but aggressive-growth stocks, you’ll likely take on too much risk. Conversely, if you are too conservative and invest only in government bonds and certificates of deposit, you’ll probably never achieve the growth you need, and your earnings may not even keep pace with inflation. Instead, build a portfolio containing a variety of investments that, when put together, can help you make progress toward your objectives.
Another trait exhibited by gardeners, and worthy of emulation by investors, is patience. If you were dissatisfied with the growth of a plant after just a few days, would you uproot it and put another plant in its place? Probably not. Instead, you’d nurture the original plant, knowing that, in the long term, it can grow. The same thinking can apply to investments. Over the short term, your investment choices will fluctuate in price, and sometimes you may be frustrated by what you perceive as a lack of progress. But instead of constantly selling off investments and buying new ones, a better strategy would be to choose quality securities and hold them for a period of many years. Eventually, your efforts may be rewarded.
What else do gardeners do that might be relevant to investors? For one thing, they get rid of weeds that can choke off the growth of flowers or vegetables. As an investor, you too can benefit from occasionally “pruning” your portfolio of those investments that no longer meet your needs, and in fact take up space that could otherwise be more profitably used. That’s why it’s a good idea to review your holdings at least once a year.
Finally, just as backyard “diggers” may turn to master gardeners for advice and guidance, you could quite likely benefit from the services of a financial advisor — an experienced professional who knows the markets and will take the time to understand your situation, needs and goals.
So the next time you see some industrious gardeners making something beautiful and productive in their yards, watch them closely. Their skills and habits might be productively transferred to you as you invest for the future.
This article was written by Edward Jones for use by Ahwatukee Foothills Edward Jones Financial Advisor Kim DeVoss, CFP. Reach her at (480) 785-4751 or Kim.DeVoss@edwardjones.com.