Manage your money like a farmer manages his crop

“Let us learn to appre­ci­ate there will be times when the trees will be bare, and look for­ward to the time when we may pick the fruit.”

— Anton Chekhov

I love the fall. Always have. I guess it stems from my roots in a very small farm­ing com­mu­nity in the corn­fields of rural Illi­nois. I learned early in life that the labor of a farmer is a volatile mix of faith and stub­born­ness. Some of my fond­est emo­tional con­nec­tions are tied to the many hours I would spend on my grandfather’s knee as we pulled the disc and plow through the soil prepar­ing for the plant­ing. Any farmer or gar­dener will tell you that a seed was never sown that did not have the har­vest in mind. You see, com­mon sense and the law of the har­vest tells us that we reap what we sow. In truth, our expec­ta­tion is to reap more than we sow. In any cir­cum­stance, it is under­stood that what­ever abun­dance is given in the grow­ing sea­son will be cel­e­brated as a har­vest when the crop is ready. This is the joy of the farmer. This is the reward and bless­ing for the hard work, patience and stub­born faith when the risk is high. This is the rea­son for the sow­ing in the first place.

I wish every­one had the oppor­tu­nity to be a farmer, if only through a sin­gle har­vest. While there are many over-used par­al­lels between farm­ing and invest­ing, I find it inter­est­ing that the finan­cial ser­vices indus­try places so much empha­sis on the “sow­ing” of money and vir­tu­ally no impor­tance on “har­vest­ing” when the sea­son turns and the crop is ready. A wise investor will man­age money like a farmer man­ages his crop; sow­ing with the har­vest in mind and har­vest­ing when the crop is ready with the turn­ing sea­son. I watched many investors ignore the law of the har­vest in 2001 and again in 2008 as many investors accounts were destroyed in finan­cial draughts trans­form­ing a poten­tially beau­ti­ful har­vest into a waste­land of regret. There are many that are now watch­ing their invest­ments reach recov­ery and it leads me to won­der, “Who will choose to enjoy the harvest?”

I am not sug­gest­ing that every­one imme­di­ately move to cash or gold as some have sug­gested in the pop­u­lar media, but it seems an appro­pri­ate time to eval­u­ate your abun­dance and har­vest the crop that is ready. The end of the year is sure to pro­vide some inter­est­ing volatil­ity as we deal with a fis­cal cliff, an elec­tion, Europe and more eco­nomic warn­ing signs.

The most rea­son­able way for most investors to har­vest is to rebal­ance their invest­ment accounts. These rebal­ances are most ben­e­fi­cial near mar­ket extremes sim­i­lar to our cur­rent mar­kets. Any port­fo­lios based in an asset allo­ca­tion model will have a tar­get port­fo­lio that acts as a com­pass for the direc­tion of the invest­ments. As time passes, the win­ners grow big­ger and the losers get smaller drag­ging the port­fo­lio away from it’s orig­i­nal tar­get. A rebal­ance back to the tar­get model will force the investor to buy low and sell high. Another con­sid­er­a­tion to remem­ber is to har­vest with the great­est after-tax goal in mind. Meet with your cer­ti­fied pub­lic accoun­tant to dis­cuss and coor­di­nate your har­vest gains and losses to give you the great­est end result. Con­trary to a more pop­u­lar say­ing, remem­ber that it is only a gain if you take it. Happy harvesting!

RC Arse­neau is a Cer­ti­fied Finan­cial Plan­ner and lives with his fam­ily in Delaware. Please sub­mit any ques­tions or topic requests to AskRc@mail.com.

The infor­ma­tion and opin­ions in this col­umn are pro­vided only for edu­ca­tional and enter­tain­ment pur­poses. Any ref­er­ence to a finan­cial prod­uct or strat­egy is not to be con­sid­ered an endorse­ment or rec­om­men­da­tion. The infor­ma­tion is of a gen­eral nature only and does not take into account your indi­vid­ual objec­tives, finan­cial sit­u­a­tion or needs. It should not be used, relied upon, or treated as a sub­sti­tute for spe­cific pro­fes­sional finan­cial, legal or tax advice. Invest­ment Per­for­mance may vary due to tim­ing and expenses. Rc rec­om­mends that you obtain your own inde­pen­dent pro­fes­sional advice before mak­ing any deci­sion in rela­tion to your par­tic­u­lar require­ments or circumstances.

Posted by RC Arseneau on Oct 2 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.