Why Your Investment Portfolio Is Like a Garden

Pond and garden

I started working full time in the summers at the ripe old age of 15.  Believe it or not, I felt pressure from one of my parents to get a summer job.

I already mowed lawns and delivered papers, but I guess that wasn’t enough.  With the best intentions, my hard working parent was just trying to instill that same ethic in me.  It worked, but let’s leave that topic for a discussion with my psychiatrist.  For now, let’s talk about gardening and investment portfolios.

MY STORY

It was an early summer morning back in the late 1970s.  I walked across my small rural home town to a fine dining establishment that resided on 15 acres of property.  The restaurant was housed in a large home built in 1891.  It was surrounded by mature trees, perennial gardens, a pond, rows of flowers planted annually, grass and shrubs.

As I walked, I was nervous.  I had never applied for a real job before.  The lawn mowing business was inherited from my older brother.  I can’t remember how I got the paper route.  That day, I put on some halfway decent clothes, but I was still a few years away from suits and ties, that’s for sure.  Being a small town, I kind of knew the owner so I walked in and asked to see her.  As luck would have it, she was there, we spoke for a few minutes and I walked away with my first real job.

Over the next few years during high school and college, I was a “jack of all trades” at that restaurant.  I waited tables, washed dishes, did food prep and organized wedding receptions.  However, my favorite job was working on what we called the grounds crew.

As a member of this small grounds crew team, we mowed grass, trimmed the hedges, tended to the pond, planted flowers and weeded the gardens.  We made sure the 15-acre property was an asset for the town. And looked great for all the visitors to the restaurant.  They enjoyed the view from the restaurant windows and would often walk the property after a nice summer evening dinner.

GARDENING

It is here where I developed an interest in flower gardening.  I like natural beauty.  It’s also fun and rewarding to see the results of your efforts turn into a pretty area full of plants and flowers that you and others can enjoy year-round.  However, a nice garden takes time and attention to start it and keep it looking good.  In order to add value to the physical asset.

You must till the soil and provide it with nutrients.  After that, you put in different types of plants to keep some blooms going all summer long.  For variety, perennials, annuals, shrubs, and decorative flowering trees are planted into an eye-pleasing arrangement.

Over time, however, some plants do not like the environment and die off.  Other plants love it and start to spread.  Some plants are even invasive looking to choke off anything that gets in the way of their quest for water and nutrients.  Some years the weather is perfect for your garden and some years you may experience a flood or drought.

YOUR INVESTMENT PORTFOLIO

I still garden today at my own home.  As the years have passed, I keep thinking that gardening is a lot like building and maintaining different components of an investment portfolio.  Somehow I see different plants like I see different investments.

Here’s how gardening relates to a few important investment principles:

  • Start with soil and nutrients – the extra cash you have saved to start your investment portfolio
  • Put in a variety of different plants so you have blooms all summer – make investments in a diverse mix of stocks, bonds and mutual funds for diversification
  • Replace the struggling plants – Have a sell strategy when an investment doesn’t work out as you hoped
  • Prune back the aggressive plants – Re-balance your portfolio periodically by selling some winners that have taken over and buying some underperformers
  • Take extra care of the garden during drought or flood – You must weather bear markets, hold steady and have some cash to make new investments at discount prices
  • Enjoy the beauty of what you have created – Watch your money and dividends grow and compound over time

CONCLUSION

So what do you think?  Is your investment portfolio like a garden?  Or do you have another analogy or way you think about your investments?  Leave a comment and let me know.

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15 thoughts on “Why Your Investment Portfolio Is Like a Garden”

  1. Hey Tom!

    I like the analogy to gardening. My actual degree is in Landscape Architecture so I get everything you’re talking about with the plant references. Plus I had similar job mowing grass as a kid.

    The only point I’d make is that an Investment Portfolio is almost easier than gardening. If you buy/hold, you don’t have to do nearly as much as you would gardening. lol

    I haven’t touched my portfolio in months, other than buying more dividend stock, which I guess you can reference to watering. Other than that though, I never touch it and it does great! I’m currently at 33% gains for the year.

    I like this analogy but would definitely say investing is easier. At least that’s what my one, dying house plant would say. =)
    -Andrew (aka Wallet Squirre)

    • Hello Andrew, Glad you like the analogy. Based on your past experiences, it sounds like you can really relate. I think you are right. If you buy well and hold, there is little required work involved to maintaining a good dividend stock portfolio. As the years pass and I’m getting a bit older, my garden seems to need more and more attention to keep it healthy. Great job on your investment results for the year and have a great weekend. Thanks for stopping by. Tom

    • Yes ,I would say garding and investing are very similar. I planted a very small tree in my backyard. And as it grew, I would dream of retirement and the correlation between the size of that tree to the size of my (401) IAM retired now and I can say they both recoup the same benifits, they both take hard work. You can’t see grass or a tree grow , if you keep looking at it, the same goes with long term investing.

  2. Very nice post Tom. It reminded me of all the jobs l had when I was in college. Ground keeper job was my favorite and l still enjoy taking care of our lawn and plants, while Mrs grows tomatoes.

    Those jobs taught me value of hardwork.

    As for investments, it’s very much like growing and maintaining a garden, so l like your analogy a lot.

    • Thanks so much Mr. ATM. Appreciate you stopping by as always. On a different note, I’m sure you are looking forward to the GE announcement tomorrow as I am. It will be interesting to see what the new CEO has to say on their path forward. I feel like my dividends will be reduced tomorrow, but maybe I will be more happily surprised. Talk to you soon. Tom

      • Oh yes, thanks for the reminder. I’ll be watching GE tomorrow. Regardless of the dividend, I don’t think I’ll be buying it anytime soon, it got too many problems. Let’s see what management has planned for the company.

        Good luck on that dividend.

        • Well, what now Tom? You still holding GE? Some analysts are saying it could take up to 5 years to turn the company around.,

          I don’t think they will go bankrupt anytime soon, they are AA- company, just badly managed. Hopefully, the new management can turn things around, but it will take time.

          In general, I avoid any company whose name starts with ‘General’ e.g. GM, GIS, and GE. I feel there is a negative connotation with the word ‘General’ as there is nothing special or focused about being general.

          • Hi Mr. ATM. Thanks for your thoughts. Yeah. I’m not happy, but I will survive. Check back for my post tomorrow morning. I’m going to review where I went wrong with GE and then will follow up shortly thereafter with another post focused on a GE stock analysis now that the news is out. I think you hit the main issue with GE, ineffective management over the recent 10 plus years. Tom

  3. Tom, absolutely I think it is! Those who plant today will have food to harvest in the future. Investing is all about planting those seeds early and often. The more you plant the better your chances of being successful, if one plant dies another may thrive to make up for it. Great analogy.

  4. Haha we are analogy buddies (me: waves & dividends, you: garden & investments)! That’s an excellent analysis!

    I would love to get into flower gardening, and have always said if I work part-time or have more time I would get into it. My favourite flowers is the peony and the plumeria. Dahlias are cool too!

  5. Hi Tom. Interesting metaphor and you have done a nice job maintaining it throughout the post. I frequently tell my older son that investing is a simple agricultural undertaking – “plant your seeds so they can start growing,” and then “reap the harvest” in the form of passive income, harvesting the fruits of your labor, etc.

    He’s not listening as well as I would like, but he is getting there. 😄 I’m going to show him this essay to keep motivating him.

    • Hi FIREman, It will be interesting how your son reacts to reading something like this post. As a young adult, I wouldn’t have responded very well, but that was just me. I already “knew everything” when I was in my 20s! I like the agricultural example. Thanks for digging through the archives here at DD. This post is the same concept as you speak about agriculture. Sticking with the same theme with your son is a good idea. But, not having any kids, I am certainly no expert on parenting. Probably best not to listen to me. I wonder if your son reads your blog? Tom

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