Through much of my life I maintained some sort of garden, even enjoying sprouting vegetables from seed in a small greenhouse so as to have the full experience. Though I tried all sorts of crops, I always loved tomatoes the best and felt I could be happy just living on them entirely. One year I made the decision to plant only tomatoes, concluding that even though I enjoyed the peas, carrots and zucchini, in my relatively small garden spot I had been wasting valuable real estate on those less desirable options. Besides, in my neighborhood there always seemed to be plenty of extra zucchini to go around.
So I planted my six garden boxes with four different varieties of tomatoes, each designed to bring forth ripe crop at different times during the growing season. I thoroughly enjoyed working on that garden each day, pulling weeds and carefully watering each plant, then sitting in my swing to enjoy the lovely smell of growing tomato plants. I could hardly wait to taste those delicious home grown tomatoes and when those early cherry tomatoes started ripening, I knew my reward was near at hand.
Then one day I went out to my garden to find my plants covered with dying leaves. I was devastated and went to my expert gardening neighbors for advice. They told me of a disease that sometimes came through the area affecting only tomatoes, and that essentially, there was nothing that could be done about it at this point. Despite valiant efforts, I lost almost the whole crop.
Gardening is uncertain, with unpredictable weather conditions, insect populations and disease patterns. Conditions favor, or attack various vegetables differently. A good year for tomatoes may be bad for corn and vice versa. I learned that having a good variety will reduce the overall potential tomato crop, but increases the likelihood that at harvest time I will not be empty-handed. It is a worthwhile trade off.
Investments have their seasons and cycles as well. When we say “The market is up” that expression can be deceiving because the parts that make up the “Market” can move in their own unique cycles. I am pretty sure that on the best of days for the stock market, I can find individual investments that have not done so well. As with gardens, conditions which favor one sector of investing may punish another.
If you allocate too much of your investment garden to a single crop, or a few, you may increase profits in some years, but suffer devastating losses in others when the season turns against you. Take an investing lesson from a part time gardener and keep planting a variety of financial crops. They may not all be your favorites but at least you will increase the likelihood of not being wiped out if a particularly tough year should hit a certain part of your garden.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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