There are investment lessons from farming
Hurricane Beryl left many farmers, particularly in the parish of St Elizabeth, reeling from severe losses. But these farmers have demonstrated the tenacity to persist, despite the setbacks, and are now replanting — a lesson that investors and everyone can learn by staying the course despite the obstacles.
In 2022, farmers contended with high prices for fertilisers due to inflation which was triggered by the war between Russia and Ukraine. Russia is the world’s largest supplier of fertiliser and together both countries supply 28 per cent of the world’s fertiliser.
In the same way, investors and pension funds suffered losses in 2022 and faced rising inflation, farmers in Jamaica and globally struggled to cope with the high cost of inputs such as equipment, seeds, and fertilizers, resulting in lower yields and reduced earnings. Regardless of the various risks they encounter from one season to the next, farmers are relentless and resilient in feeding the society and providing financially for their families.
If you are planning for retirement or your financial future, some lessons can be learned from the farmers. Let’s examine the traits possessed by successful farmers and the lessons and principles that we can apply to our financial planning.
A good farmer is patient, persistent, and passionate about his/her work. Being disciplined and committed to the daily tasks, knowing that such qualities will lead to a long and successful career. A successful farmer is knowledgeable about farming and the techniques required to produce the best yield. Having a positive mental attitude at all times bracing for any challenge that may lie ahead, the farmer is not deterred by short-term interruptions or weather fluctuations but is focused on the long-term objectives in the same way investors should weather financial storms and market volatilities and not lose sight of the long-term financial goals.
Whereas some investors become emotional during times of loss or uncertainty and abandon their long-term plans, the farmer remains resolute. He knows that raising his voice at his crops or animals will not produce a better yield or cause them to grow faster. Having the right temperament is important for the farmer to think clearly and plan wisely. The farmer doesn’t quit because he understands that setbacks are temporary.
A successful farmer is not a pessimist. There may be a storm today, but it too will pass. Recovery may seem long, odious, and costly, but farming is a lifelong career. Likewise, an investor should view investing as a lifelong endeavour, at every stage of life, money will be necessary. Therefore, emotional control is important for the successful investor. Maintaining a positive attitude in times of financial crises will allow for the right decisions to be made and the correct strategies implemented. Being proactive in decision-making will stave off emotional reactions or outbursts when market fluctuations occur.
The farmer knows when it’s time for harvest and doesn’t reap prematurely. So too the investors need to give their savings and investments time to grow and not make frequent withdrawals. The farmer keeps sowing as long as he has seeds. Oftentimes I remind clients to keep adding to their accounts as long as they have money to invest in the same way the farmer water and nurture the crops. Don’t build up your savings and then have your funds idle. Just as the farmer ensures that the soil is fertile to sow the seeds, the investor should ensure the best instruments to invest resources. In addition, making regular deposits to investment accounts increases the compounding of the returns.
The farmer practises diversification. There are short-term crops and long-term crops. The short-term crops provide for cash flow for the short-term goals. .
The farmer understands the value of time and understands the seasons. In the same way that the farmer assesses the risks associated with farming, the investors should know their risk profile and invest accordingly.
One of the most successful investors, Warren Buffet said, “Ignore the chatter, keep your costs minimal, and invest in stocks as you would in a farm.” As the farmer assesses the weather, stay informed, be alert, and adjust investment strategies only when necessary.
Grace G McLean is a financial advisor and retirement specialist at BPM Financial Limited. Contact her at: gmclean@bpmfinancial or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at: livingaboveself@gmail.com