What gardening can teach us about investing… and vice versa

Sam Slator 30/05/2018 in Basics

Human nature is such that we are prone to creating barriers for ourselves and investing is no exception. When asked why they don’t invest, many people will say that it is “too complicated” or “only for people with lots of money”, when in fact it can be very simple and anyone could – and should – do it.

One way of making it seem more accessible is to think of it in terms of gardening.

Start small and have patience

If done properly, both gardening and investment require taking a long-term view and a vision of what you want to achieve in the end – whether that is a beautiful kitchen garden or enough money to retire comfortably.

You could plant a bulb in November and not see a flower blossom until May. And it can take years for a shrub or a tree to become fully established. Likewise, investments can take time to mature. But you can start small and build as time goes buy.

It doesn’t matter if you don’t have a large garden to landscape or lots of money to invest. You can still create a pretty window box, or you save just £50 a month. Every little counts and it soon adds up. As little acorns grow into large oaks, so £50 a month invested in the average UK equity fund over the past 20 years, could have grown into a pot of money worth more than £26,000*.

Diversify for a fuller, more colourful bloom

Diversification is also important. In gardening, the wrong bulb could be planted in the wrong type of soil, or unseasonal weather or pesky bugs could impact growth of one species more than another. You don’t want a completely colourless garden or allotment with no fruit – or veg – to bear.

When it comes to investment it is also key not to have all your eggs in one basket as you could lose most of your savings. In 2008, when global stock markets fell by some 20%-30%, the M&G Strategic Corporate Bond fund stayed in the black, returning 3.23% and the M&G Emerging Markets Bond fund rose more than 30%. Those with investment portfolios invested across different asset classes were generally less badly hit by the global financial crisis.

Employ a gardener or get your hands dirty?

When it comes to picking the flowers or the funds, some people hire professionals to do it for them, some prefer to get guidance and tips from places like the Royal Horticultural Society or fund research ratings websites like Fund Calibre and do it themselves.

And don’t forget to weed

It’s also important to weed. Ivy is often accused of swamping nearby plants, while black walnut trees do not allow anything to grow underneath them. And some plants work better together than others: tomatoes benefit from having marigolds, garlic and chives in the same flower bed but don’t do so well if planted near cauliflower or cabbage.

When it comes to investing, you need to check regularly that funds are adding value to your portfolio and not subtracting from it too.

*Source: FE Analytics, total returns in sterling of the IA UK All Companies sector average over 20 years to 22 May 2018.

The 2018 RHS Chelsea Flower Show is sponsored by M&G Investments

This article is provided for information only. The views of the author and any people quoted are their own and do not constitute financial advice. The content is not intended to be a personal recommendation to buy or sell any fund or trust, or to adopt a particular investment strategy. However, the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Past performance is not a reliable guide to future returns. Market and exchange-rate movements may cause the value of investments to go down as well as up. Yields will fluctuate and so income from investments is variable and not guaranteed. You may not get back the amount originally invested. Tax treatment depends of your individual circumstances and may be subject to change in the future. If you are unsure about the suitability of any investment you should seek professional advice. Whilst FundCalibre provides product information, guidance and fund research we cannot know which of these products or funds, if any, are suitable for your particular circumstances and must leave that judgement to you. Before you make any investment decision, make sure you’re comfortable and fully understand the risks. Further information can be found on Elite Rated funds by simply clicking on the name highlighted in the article.