Planting an Investment Portfolio

This week I attended the RHS Chelsea Flower Show, and while I was enjoying the gardens and floral displays it occurred to me that gardening and investment management have more in common than you might think.

Chatting with some of the designers, we were discussing how important it is for them to get to know the client, and understand what the space will be used for. How long are they expecting to stay in the house, how much time do they have to spend on maintenance, what are the growing conditions, is it sunny or shaded, wet or dry? What type of soil, is it acid or alkaline? What sort of budget is there to spend on new plants or do you have to work with what you’ve got?

Your savings and investments are no different. Before doing anything you need a plan! Why are you investing? What is on the horizon? Buying a house, school fees, childrens’ weddings, retirement, security in old age? How long do you have to achieve this and how much money do you have now? What can you expect to save or invest along the way? Are you comfortable with risk or risk averse? Do you have the knowledge, time and experience to do this yourself or would you be happier to appoint a professional to really get to know you, understand what you’d like to achieve and look after things for you?

However in both cases there are things that can derail the best laid plans.

Weather and garden pests are probably the most likely candidates to thwart your horticultural dreams. Too much rain or not enough, slugs and snails; there are everyday hiccups that we can intervene in and most plants will recover. Even if something dies there should be others to take its place but occasionally something sudden and unexpected makes a drastic change; a storm blows right through the garden knocking down trees and fences or a late frost takes its toll on early spring blooms. At that point it might be necessary to take stock and reflect on what has happened, but it is unlikely to change your longer-term plans for the space, and what you want to achieve in it. Such events seem a world away from investment but there are similarities

There are every day wobbles in individual investments; perhaps unseasonal weather has affected a business’s trading figures and given time this may correct itself. Perhaps the business has made fundamental strategic errors and it becomes clear that this is a longer-term problem and the investment does not flourish, but this is isolated to one of your holdings. Then again occasionally there can be sizable shocks like the banking crisis, or the current uncertainty surrounding BREXIT or the potential US/China trade wars. It can feel like a huge storm engulfing all aspects of the business world, the whole economy is affected and everyone feels the effects. If you have planned your portfolio properly you may step back to reflect, and assess things, but it is unlikely that you will need to panic or make big changes; your long-term goals are unlikely to be altered by events in the market.

Back in the garden careful planning, an eye on the weather forecast and growing the right plant in the right conditions will hopefully minimise the impact of any plant that doesn’t prosper! Gardeners mix their plants, making sure they have a mix of plants that are at their best at different times of the seasons for best effect, they keep the weeds down, and prune overgrown shrubs even forgoing a flowering season for a healthier plant in the future, although the flowers are lovely.

Portfolios are no different – they need monitoring, tidying up from time to time and if a holding gets too big because it’s successful it should be pruned, perhaps at the expense of some capital gains tax, even if the dividends are wonderful! That way you’ll be able to spread your investments and any passing storm is less likely to blow the whole thing over!

Gardening has been much commented on recently as an antidote to the stressful lives we are all leading at the moment, sometimes one can focus too much on the short term movements of stock markets, so perhaps then the best thing to do might be to take a mindful wander around a lovely planted space, prune the roses or even just cut the grass!

If you would like a cup of tea and a chat about your investments perhaps to discuss your objectives or revisit them to check your strategy, please do get in touch, I’m happy to chat about your garden too, although I can’t promise any gardening assistance – I have plenty of work to do in my own!