By Jane Young
As the weather gets warmer, I have started to think about planting and nurturing my flower gardens. This made me realize there are many similarities between gardening and investing. I have planted a lot of perennials to create a garden that will last for many years. However, I am impatient 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 intersperse some annuals with the perennials. The annuals will meet my short term needs but are not a good long-term investment. They will provide beautiful color this year but will die and will not return next spring
To build a successful garden you must plan, prepare the earth, and plant seeds long before reaping the benefits. Investing is like gardening in that you need to think ahead to create a plan that will meet your long-term objectives. You must 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 is essential to meet short term needs. Every year I have 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.
With both gardening and investing it is 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 will not meet your end goal. Just as vibrant short-term annuals can provide a lot of immediate satisfaction, they do not 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.