#1 – Create a conducive environment for growth. The most important step in gardening is to prepare a bed of fertile soil for your plants to grow.
Money lesson: Similarly, investments require an environment where they can thrive. Faithfully contributing money to bad investments, or a bad brokerage, will do nothing but increase losses over time. Take some time to investigate the various brokerage houses and fund managers before deciding where to invest.
#2 – Select the right mix for optimal growth. Some plants tend to do better when surrounded by other certain types of plants. Some plant varieties are good are warding off insects (such as marigolds). Carefully selecting the right combination of plants could improve the entire garden.
Money lesson: Selecting the right types of investments makes for a more balanced, well-diversified portfolio. With my own finances, I have a blend of tax-free and tax-deferred retirement accounts from both my employer, and things I have opened on my own. I also have a couple cash accounts for short-term savings goals, and conservatively invested taxable funds for longer term goals short of retirement.
#3 – Tend to your square foot garden often, but don’t over-do it. Plants need two basic things to grow – water and sunlight. However, many new gardeners with good intentions kill crops by over watering, or watering too frequently. These overactive gardeners would see improved results if they backed off a bit. Deep watering plants every few days encourages a deeper root system as plants dig down through the soil in search of water.
Money lesson: Overactive investors who constantly make changes to their accounts likely see diminished returns when compared to those who buy and hold for the long term. A few active traders can beat average market returns, but keeping up with single investments requires a lot of homework. If you are like me we have other things competing for our time, so a healthy dose of long-term investments set on auto-pilot lowers the hassle factor.
#4 – Be patient – results don’t come overnight. It took nearly two weeks of faithfully watering and tending to my square foot garden before I began to see green sprouts poking through the soil. It would be unrealistic to expect juicy, plump tomatoes to magically appear two days after planting the seeds.
Money lesson: It is also unrealistic to expect double-digit returns on investments in only a couple months. Select a strong portfolio, contribute to them often and check up on them every few days, but don’t obsess over the results in the short term.
#5 – Keep invaders out. The biggest threat to a square foot garden is from outside invaders, namely insects. Aphids, moths and slugs can wreak havoc to a vegetable garden, chewing away on leaves and fruits.
Money lesson: “The Tax Man” can take chunks out of your profits by eating away at your returns. Be careful when selecting investment vehicles to be sure you are not overly exposed to taxes. Taxes are a part of investment life, but some careful planning can reduce the amount of “fruit” you have to share!
#6 – Don’t be afraid to harvest profits. When fruits are ripe for the picking you must be ready to harvest them. Nothing spoils a garden faster than over-ripened, spoiled fruits and vegetables hanging from the vine. You’ve worked hard to produce these crops, now enjoy the fruit of your labor.
Money lesson: When investments, particularly those outside of retirement accounts, produce a sizable return you need to ring the register and take those profits. It is tempting to let the investments sit to try and earn even more, but this plan usually fails when the investment begins to make a declining correction.
#7 – Prune back overachieving crops. In one of the garden squares (top right) I planted sugar snap peas. They took off! So much so they soon were crowding out my tomato plants. I pruned them back a bit, but they came back with a vengeance. I realized that they were probably not the best crop to plant in a square foot garden, so I transplanted them and planted squash in the empty square.
Money Lesson: It is a good idea to rebalance your portfolio at least once a year, particularly if one of your funds has grown significantly. For instance, when the real estate sector was booming a few years ago many investors saw the value of REITs, or similar real estate related investments, increase considerably. These investments quickly represented their largest fund asset. To rebalance their portfolios many fund owners sold off a portion of REITs, investing in other funds to bring individual fund balances back in line with their desired asset allocation mix.
#8 – Get rid of poor performing crops. Poor performing crops take up space and provide low yield. My strawberry plants were not producing, while other crops were taking off. I ultimately made the decision to cut my losses and remove all but two strawberry plants (lower left square), making room for new investments in a variety of peppers.
Money lesson: Many times investors hold on to poor performing investments for too long, either because they don’t want to record the loss officially, or because they hope the investment will regain some value and lessen the financial hit. When you are stuck holding an investment you no longer believe in, cut your losses. Use the loss to offset some gains you registered from another investment. Use the proceeds to fund a new investment you have researched and feel confident will be a winner over the long term.
To learn how to build your own square foot garden, read my popular post, How to Build a Square Foot Garden.