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.