We recently built a new home and have been feverishly working on landscaping and planting new flower beds. While going through the process of planting and nurturing my flower gardens I realized there are many similarities between gardening and investing. I planted a lot of perennials to create a garden that will last for many years. However, I’m anxious for the perennials to grow into the large, colorful flowers I have envisioned. I realize it takes time and patience to develop a gorgeous garden. To satiate my immediate need for some color I interspersed some annuals with the perennials. The annuals will meet my short term needs but aren’t a good long term investment. They will provide beautiful color this year but will die and won’t return next spring
To build a successful garden you have to plan ahead, prepare the earth and plant seeds long before reaping the benefits. Investing is similar to gardening in that you need to think ahead to create a plan that will meet your long term objectives. You have to start by planting the seeds and continue feeding and nurturing your investment plan. After your initial investment is made, continue making contributions and annually re-balance your portfolio to be sure you stay on track. Periodically some weeding is required to remove poor performing or inappropriate investments from your portfolio. You may also need to add some nutrients by adding better performing mutual funds or by expanding on the categories of funds in which you are invested.
It’s essential to meet short term needs. This year I had a short term need for some annuals to add color to the garden. In your portfolio, you need to include short term money for emergencies and living expenses. If short term needs are addressed you can invest your long term money more effectively with greater confidence.
Additionally, in both gardening and investing it’s important to stay diversified. My garden has a variety of flowers that bloom at different times of the year or react differently to varying weather conditions. Your portfolio should also be diversified with a variety of different investments that help you buffer against a variety of market conditions and changes in your personal life.
Just like perennials in the garden, investments in your portfolio need time to grow and absorb fluctuations in the market. If you become impatient and give up before they have time to fully bloom you won’t meet your end goal. Just as vibrant short term annuals can provide a lot of immediate satisfaction they don’t result in a garden that is sustainable over many years.
Investing, as in gardening, is a slow and steady process. Get started, set a plan, keep a long term perspective and stick to your plan. Patience and perseverance will help you build a gorgeous garden and a more secure financial future.