In many parts of the country, it’s harvest season. As a consumer, you will certainly be affected by the labors of farmers — and their particular skill set can also teach you a lot in your role as investor.
Here are a few suggestions for putting farmers’ behaviors to work for you:
• Keep a cool head. Farmers have to cope with all sorts of challenges – bad weather, changing crop prices, availability and cost of land, global trade policies, etc. But the most successful farmers don’t panic, follow sound agricultural practices and adapt their work habits as necessary. As an investor, you, too, need to keep a cool head, especially in the face of volatile markets, political turmoil and changes in the economy. Don’t overreact to today’s headlines; instead, constantly plan for tomorrow, and follow an investment strategy designed to help you achieve your goals.
• Keep learning. Farmers are constantly learning new techniques from agricultural extension services and other sources. When you invest, you can also benefit from educating yourself on the various factors – corporate earnings, changing interest rates, and so on – affecting the financial markets.
• Control your expenses. Farming isn’t cheap. The cost of farm equipment is daunting, land is expensive, water usage can be enormous – the list goes on and on. The most successful farmers work hard to manage their costs, and it’s an ongoing challenge. As an investor, you also can incur plenty of costs – especially if you’re constantly buying and selling securities, which can lead to heavy commissions and fees, along with higher-than-necessary capital gains taxes. Following a long-term, “buy-and-hold” investment strategy can help you control your investment costs while also helping you build and preserve your long-term financial security.
• Be flexible. The ups and downs of growing commodity crops have become more frequent, forcing farmers to become more flexible and resourceful in their business. For example, many farmers have started producing specific products for specific markets, thus giving them an “all-weather” income stream. As an investor, you may also need to look for new opportunities as they arise, provided these moves are still within the overall context of your long-term strategy. To be able to make such moves, you’ll want to keep a reasonable amount of “cash” in your investment portfolio.
• Be patient. Farmers plant crops and nurture them carefully for months before it’s harvest time. In fact, it’s possible that no other occupation requires such a willingness to wait for results – and payouts. Similarly, when you invest, you simply can’t expect to instantly turn huge profits; no matter what you may hear, investing is not a “get rich quick” type of endeavor. The best investors work toward growth slowly, over a period of many decades, and only by diligently pursuing a strategy that’s appropriate for their individual needs, goals and risk tolerance. In short, when it comes to investing, patience isn’t just a virtue – it’s a necessity.
Farmers work long hours, but they don’t just work hard – they work smart. Emulating their work habits and patterns can help as you cultivate the investment fields.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor (member SIPC). Contact Stan at Stan.Russell@edwardjones.com.