Weed & Feed

During a recent discussion with a client (and friend), we were reviewing some suggested portfolio changes. After going over the recommended changes and asking some questions, he agreed with our thought process* and used what I thought was a perfect phrase to sum things up: “So, this is kind of like weeding and feeding your lawn.” Exactly!

I am far from a lawn care expert, and you need not look any further than my front yard for some very telling evidence. I will admit to making several feeble attempts to lay down weed preventer, aerate, and even seed bare areas. However, my consistency and timing were severely lacking on all fronts, and it is debatable whether my efforts yielded any gain (or loss in the case of weeds).

A simple web search will tell you that you need to apply weed preventer before the weeds start to grow and fertilizer (feed) should be used when grass is actively growing. Usually, this is in the spring and fall for our area, but I am sure there are other methods and timings that work. Certainly, the key in every case is consistency and commitment.

Managing and monitoring your investment portfolio has many similarities to taking good care of your lawn. Getting rid of bad, overly risky, or overly conservative investments (weeding) and adding better more appropriate investments (feeding) can help your money grow more effectively.  As mentioned in previous posts, finding the right mix for your particular situation is important. Keeping your money in all stocks all of the time might give you the highest return over the long term, but there may be too much volatility and risk to keep you comfortable as an investor.

Much like neglecting your lawn will yield a less than attractive yard, staying in all cash-like investments will yield very little inflation-adjusted results for your money. The rate of return may “feel” okay and comfortable over certain periods, but when you adjust for inflation (the cost of goods and services rising) things look very different. A good example can be found in the chart below:

blog chart

Click on the image to enlarge.

So, do your best to prevent weeds before they become a problem and give your grass what it needs to grow. Or, do what I ended up doing and pay someone who knows better!

*Instant agreement does not always occur! (and that’s okay)

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