Invest like a farmer

Invest Like a Farmer_Warren Buffett

Invest Like a Farmer

It is tempting to overload the conversation by quoting statistical models and technical terms when discussing investments. In this fast-paced financial world focusing on trading trends, online platforms and market movements, it’s easy to get lost in the weeds and lose sight of the grounding principles of managing your money essential to long-term success.

However, investment decisions should mostly rely on good judgment and basic arithmetics.  While some investors prefer rapid trades and short-term gains, others adopt a more patient and disciplined approach.

To better understand investing principles, I find solace and clarity in looking into timeless farmer’s wisdom to guide my investment approach.

You might have heard these drops of wisdom:

Dig your well before you are thirsty (plan in advance)

You reap what you sow (invest and wait for returns)

You sit in the shade today because someone planted a tree a long time ago (invest long term)

– don’t put all your eggs in one basket (diversify)

Invest Like a Farmer, by Warren Buffett

Farmers possess a unique set of qualities and practices that apply to the world of finance. Warren Buffett himself often suggests investing like a farmer and turning off the noise from self-proclaimed market experts trying to time the market. Check out Buffett’s Financial Education lecture on YouTube or Podcast.

Invest Like a Farmer_Warren Buffett

Farmer’s Wisdom, by Carrie Schwab-Pomerantz

Even Financial planners from Charles SCHWAB can’t resist drawing analogies between farming and investing.

Your fences need to be horse-high, pig-tight and bull-strong. Be prepared, set boundaries and have all your safeguards in place. So what does this mean for your finances? Right away I think of the importance of setting goals and planning to meet them, which also means creating a realistic budget that includes savings. Want to make your financial fences even stronger? Create a financial plan.

Every path has a few puddles. You’ve probably made some good money choices and, like almost everyone, you’ve probably made some mistakes. Financial “puddles” might be small things like blowing your budget now and then or bigger things like falling behind on retirement savings. But whatever the size of the puddle, rather than getting discouraged, figure out how to get around it. By changing a few financial habits, you can make positive changes.

If you find yourself in a hole, the first thing to do is stop digging. Digging ourselves into a hole is a common metaphor for getting into too much debt. We know we need to stop, but the question is how. For many folks, credit cards are a major cause of debt overload. So the first step is to cut down on using them. Pick just one card and put the others away. As much as you can, commit to using cash or paying off credit card balances immediately when possible. Debt in itself isn’t bad, but you have to manage it wisely so it doesn’t bury you.

Only the farmer who faithfully plants seeds in the Spring reaps a harvest in the Autumn. This bit of wisdom from B.C. Forbes, the founder of Forbes magazine, poetically conveys a straightforward message: You must get started early to see better results. And that certainly applies to investing. Many savers hesitate to invest because they worry about market volatility or think investing is too complicated. But while saving is important, history has shown that investing is the best way to grow your money and beat inflation. And it doesn’t have to be complicated.

Life on a farm is a school of patience; you can’t hurry the crops or make an ox in two days. This insight from a French botanist can certainly be applied to investing! While there may be a lot of current attention on fast trading, a long-term view is essential to weathering market ups and downs. Once you set your goals and create a diversified portfolio matching your timeline and feelings about risk, you must be patient. As often stated, it’s time in the market—not timing it—that’s the key to success.

The farmer has to be an optimist or he wouldn’t still be a farmer. These words from Will Rogers can apply to many things in life. And certainly being optimistic is as important in investing as in farming. When it comes to finances, you can’t control what will happen any more than a farmer can control the weather—a market drop, a job loss or a pandemic can certainly set you back. But with the right attitude—rooted in a solid financial plan—you’ll be able to adjust and continue to make progress toward your goals more easily.

 

The Benefits of Investing Like a Farmer

So, let’s dig into it, by exploring the benefits of investing like a farmer and how this approach can help you cultivate long-term wealth.

Cultivating Patience | Invest like a Farmer

Farmers understand that sowing seeds, nurturing crops, and reaping a bountiful harvest take time. Similarly, successful investing requires patience. Rather than chasing quick wins or succumbing to market volatility, investing like a farmer means adopting a long-term perspective. It involves selecting quality investments and allowing them to grow and mature over time. This patient approach allows investors to ride out short-term fluctuations and capture the full potential of their investments. There is a time to do nothing!

Embracing Diversification | Invest like a Farmer

Farmers are well aware of the risks associated with relying on a single crop. They diversify their harvest by planting a variety of crops to mitigate the impact of unpredictable weather or market conditions. Likewise, diversification is a key principle in investment. By spreading investments across various asset classes, sectors, and geographic regions, investors can reduce risk and protect their portfolios against market downturns. Diversification ensures that the overall portfolio remains resilient even if one investment underperforms.

Nurturing Your Investments | Invest like a Farmer

Farmers dedicate time and effort to ensure their crops receive the care they need to thrive. They monitor soil conditions, water supply, and weather patterns, making necessary adjustments to optimise growth. Similarly, successful investors actively monitor their investments, keeping a watchful eye on market trends, economic indicators, and the performance of individual assets. Regularly reviewing and rebalancing your portfolio helps ensure it remains aligned with your financial goals and takes advantage of emerging opportunities.

Harnessing the Power of Compound Interest | Invest like a Farmer

Just as crops grow exponentially over time, compound interest can work wonders for your investments. Farmers understand that allowing a portion of their harvest to serve as seeds for the next planting season can multiply their yield. Similarly, investing early and allowing your returns to reinvest can significantly boost your wealth over the long term. Compound interest allows your money to generate more money, accelerating the growth of your investments.

Planning for Seasons of Harvest and Drought | Invest like a Farmer

Farmers are acutely aware of the cyclic nature of their profession. They plan and prepare for seasons of abundance and periods of drought. This ability to adapt and navigate challenging circumstances is essential for successful investing. The financial markets also experience periods of prosperity and downturns. Investing like a farmer means having a well-defined financial plan considering favourable and unfavourable market conditions. It involves building an emergency fund, maintaining a long-term focus, and not succumbing to panic during market volatility.

Conclusion

Investing like a farmer is a mindset that emphasises patience, diversification, nurturing, and long-term planning. By adopting these principles, investors can cultivate wealth and navigate the ever-changing landscape of the financial markets.

Just as farmers sow seeds expecting an abundant harvest, investors who approach their investment journey with the same diligence and discipline are more likely to reap the rewards of their efforts through long-term financial success. So, take a cue from farmers and cultivate your financial future with prudence and resilience.

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