Life (and financial) lessons from the garden

Published May 7, 2020
 A couple and their dog enjoy time in their garden

It’s that time of year again. The days are longer and warmer and the air smells different. To benefit from our short growing season, now is the time to start sowing the garden. While memories of last summer and summers long gone are flooding back, we think about how we may need to do things differently this year. Should we grow a garden from seed or buy a ready-made planter full of perfectly-coordinated flowers promising summer-long blooms? Maybe this year all we can aim to do is keep the lawn in check.

Similarly, now is also the time to look at where things stand from a financial perspective. How are we feeling heading into this next season? What should we be thinking about now to ensure we’re facing our futures as prepared as we can be?

It’s never too late to start

Those of us who finished our outdoor chores before the first snow fell are probably feeling a little more comfortable than those of us who hadn’t properly prepared last Fall. Regardless of how much work has happened to date, there’s a lot that can be accomplished in the next few weeks to make for a productive season.

Similarly, whether we’re comfortable with the condition of our financial health or feeling frustrated at the current state, it’s important to take stock of where we are and move forward from there. Acting rashly, putting off thinking about it, or doing nothing for fear of doing something wrong won’t help us reach our goals. Not in the garden and not in our portfolios.

Define success

A sound strategy is designed around what we are trying to achieve. When deciding what to plant in our gardens, we make different decisions based on our goals; if we need the harvest to feed us through winter, we make different choices than if we're hoping for a few beautiful blooms to brighten our yard. Financial decisions should be guided by our goals as well. What are the funds going to be used for? Will we be reliant on the portfolio to fully fund our retirement or will we be supplementing pension or rental income? Do we have a goal to help with our children's education or pay off debt?

Some goals may be static, and others may change over time. But understanding what we're striving to achieve is key to determining what steps we need to take to get there.

Reassess the strategy as circumstances change, but resist the urge to overwater

We make choices about what seeds to plant and where the plants will go. We assess the soil, think about how much sun that part of the yard gets, how long the growing season is, and how dependent we are on any particular plant thriving. We understand the watering requirements and know that we'll need to top-up nutrients throughout the year. And we anticipate challenges, like strong winds or hungry wildlife, and we prepare for them as best we can.

In preparing for our financial future, it pays to have a strategic approach as well. Our Edward Jones advisors took time to understand our goals, income needs, and comfort with risk when they helped us create our personalized financial strategy. They considered our timeline for income accumulation and anticipated how long the funds will be needed. Factoring in our willingness to weather volatility, they worked with us to build a well-diversified, balanced portfolio with appropriate portfolio objectives and asset allocations.

Stick to the strategy

So what do you do with your garden when the weather changes suddenly? Storms are expected, but it's nearly impossible to predict when or at what point in the growth cycle they'll hit. Yet we prepare for them nonetheless. Not all our plants will thrive, but that too was factored into the strategy from the beginning. This year may be a great year for peppers and a not-so-good year for tomatoes. Temperatures may fluctuate wildly or they may be cooler than usual. Some of our plants will flourish and others will struggle, while some will need to be pulled.

In working with you to create your personalized portfolio, your Edward Jones advisor knew that investments don't all behave the same way at the same time. Each investment in your portfolio serves a valuable purpose. A well-balanced, diversified portfolio includes cash and short-term fixed-income for near-term income; intermediate and longer-term bonds and fixed income investments for medium-term income; and stocks and growth investments for long-term income.

When market conditions change, it may be tempting to make significant changes to our portfolios. But just as we wouldn't pull up the entire garden and start over mid-season and expect a healthy harvest, it's important to be disciplined with our portfolios.

Weathering the storm: The TSX since 2009

Source: FactSet, TSX Index, 1/1/2009 - 3/31/2020. Past performance is not a guarantee of how the market will perform in the future. The TSX is unmanaged and not available for direct investment.

This chart demonstrates that while we've experienced several economic storms since the 2009 financial crisis - including the 2011 Euro Debt Crisis, the 2015 Oil Crisis, 2018 Recession and Fears and the 2020 Coronavirus – it's important not to oversteer and start all over, but rather be disciplined with your portfolios.

As you can see in the chart above, we've weathered some economic storms in the past. While storms come and go, what they do really well is bring to light all the precautions we can take to better prepare ourselves for next time. Perhaps we realize that we aren't as risk tolerant as we thought, or that our spending can be restricted if needed. Perhaps we realize that certain documents should be prepared or updated. Perhaps we're thinking about whether we'd be more comfortable with additional life, critical illness, or long-term care insurance coverage. And perhaps we realize that even if there is some damage, things would have been far worse had we not been as prepared as we were. Whatever you've learned from the most recent storm you've endured, your Edward Jones advisor will work with you to help you adapt and create strategies appropriate for your financial future.

Know that the cycle continues

Year after year, we plant our gardens because we know that even if the harvest is not as bountiful as we'd like, we will yield a better crop than had we done nothing. We water, fertilize, learn from our mistakes, and trust that putting in the work will pay off in the end. We do these things because no matter how uncomfortable or inconvenient it is in the moment, we won't get a harvest of any kind if we do nothing. Taking this same approach to our financial strategy is necessary. Work with your Edward Jones financial advisor to focus on your goals, assess your risk tolerance, rebalance if necessary to ensure appropriate diversification, and be disciplined in these uncertain times to remain on track toward reaching your goals.