by Kathryn Hauer, CFP®, EA
A garden can teach a lot. Patience, perseverance, commitment, etc. – all of which can be used for investing.
I don’t have a garden. I don’t even like to go outside much. However, I know that many people love their gardens — and hate the weeds that try to overtake them. “If you were to track every hour spent in your garden, you would probably find that you do an inordinate amount of weeding,” writes Barbara Pleasant at FineGardening.com. Well, Barbara, I’m sure you’re right and your fellow gardeners would agree.
As a financial advisor, I see many parallels between gardening and building wealth — especially when it comes to the weeds. Several ideas on how to handle weeds in a garden apply to your finances as well. Here are five keys to managing the weeds in your financial garden.
1. Patience is a virtue
Timing is everything in weed control and in portfolio management. It makes more sense to pull weeds after a drenching rain than when the soil is parched and dry. When it comes to stocks, just because you’re ready to buy doesn’t mean the timing is right to invest. Sometimes you have to be patient and wait until it is wise to act.
2. Diligence is the mother of good luck
To grow more flowers, you need to “deadhead” plants — that is, remove withered blooms. Your portfolio also grows larger when you cull the investments that aren’t compatible with your goals. Each year you should rebalance your portfolio. That means selling some of the investments that did well and buying more of the ones that didn’t do as well so you maintain the right mix to match your goals. These practices take research and time, but are worth the effort.
3. An ounce of prevention is worth a pound of cure
Putting mulch around your plants reduces weeding time because it deprives weeds of light while keeping the soil moist. Be proactive in preventing financial weeds as well: If you know you could fall for dubious deals, stay away from seductive ads and the people who offer them. Or, if you know it will be hard for you to stay invested when you see volatility in the market, avoid watching too much financial news.
4. An investment in knowledge pays the best interest.
Innovative watering techniques can deliver the right amount of water to plants while starving weeds, thus saving you time. Financial experts can do the same for you with your money. Whether you choose a Certified Financial Planner or a Registered Investment Advisor or a company like E-Trade or Vanguard, accessing expert knowledge saves you time and helps grow your portfolio.
5. Enough is as good as a feast.
In the garden, you go after the weeds that have emerged, not the seeds hidden in the ground. You barely have time to manage the obvious weeds, let alone the hidden ones. Learning about money is no different. It’s impossible to keep up with all of the financial information that’s available. Try to not flood yourself with too much noise; information overload can overwhelm even the most avid researcher. Choose a limited number of unbiased non-sales resources to rely on for financial research and information.
Reviewing your finances can be as tedious as weeding your vegetable garden. However, consistent growth in gardens and portfolios require ruthless and consistent action. As Frances Hodgson Burnett writes in The Secret Garden, “Two things cannot be in one place. Where you tend a rose, my lad, a thistle cannot grow.” So take the time today to do a little financial weeding.
First posted on NerdWallet.com and CSMonitor at http://www.csmonitor.com/Business/Saving-Money/2015/0925/Five-investing-tips-from-your-garden