What I learned from growing plants about investing
They taught me the basic rules of investing and portfolio management
I own quite a few houseplants, but not all of them do equally well. Some blossom, some do well, and others seem to wither or at least lose some of their leaves. The interesting thing that I noticed was that plants that I pay less attention to are doing better than others that I pay more attention to. This got me thinking. Why is this and is this transferable to investing in different assets?
1. Plants behave seasonally
Some of my plants are green all year round, others only in summer or spring. It can be the same with investments. This does not necessarily mean that there are assets for summer and winter, but rather that there are assets that are suitable in “winter phases” such as bear markets and others perform better when we are in “summer phases”, so-called bull markets.
Here is an example: In bear markets, “value stocks”, which produce everyday products, for instance, are better suited than “growth stocks”. In many cases, “value stocks” also pay dividends. In bull markets, on the other hand, the price growth potential of growth shares is greater than that of value shares.
This means that, depending on the market situation, it can make sense to reallocate assets.
2. Plants must be cared for
If you leave plants to themselves and do not water them, sooner or later they will wither and die. The same applies to the investment portfolio. Depending on the current market situation and the chosen investment, the portfolio must be restructured, adjusted to new information or trends. But don’t overdo it. Sometimes it is better to leave the plants alone. In the case of investments it is important to evaluate new information. If the information isn’t good, wait for new information before you make a decision.
3. Plants grow better with fertilizer
In a recent article, I described that the return depends on the invested capital. In other words, larger assets also achieve higher percentage returns. It’s like the plants I fertilize, they often grow faster than others. In terms of my portfolio, this means that one should increase the amount of money invested.
4. Offshoots are the compound interest of plants.
One plant I hold in high regard is the bow hemp. It is easy to care for, can withstand almost any condition and can even manage without water for 2–3 weeks. The surprising thing is that it produces a lot of cuttings. I can always plant these offshoots in new flowerpots. After some time, these produce offshoots themselves, while the original plant also continues to produce offshoots. This process can also be applied to an investment with regular interest payments. This means that reinvesting the interest can lead to ever-increasing returns in a few years.
I hope this brings plant lovers closer to investing, too. And for all of you who are already investing, plants are an investment in good air.😉
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Disclaimer: The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial, legal or tax advice. The content of this text is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. The author does not guarantee any particular outcome.
