Are You Prepared for Your Harvest?

Don’t you wish positive times could go on forever?

I asked Maureen this upon returning from our recent vacation, after we had enjoyed the warm climate and sunshine.

And while we all wish that we could always be in times of harvest, the times and seasons are constantly changing. It is during these changing times when we need to prepare for the time of the next harvest.

Whether it is from a personal standpoint of working to be able to save for vacation or investing for the future, it is the times of hard work and sacrifice that allow for the times of plenty.

As we are coming out of winter here in the Northeast, we all look forward to the return of spring and the new life which will spring up around us.  It is a time when we will fertilize and feed our landscapes in order to enjoy the full beauty during the summer:  The time of harvest.

Harvest_august_2013This is how most investors need to view their portfolios.  While it would be nice if our investment portfolios were always in the time of harvest – always increasing in value – the investment portfolios also go through cycles.  The ultimate success of having the portfolio grow and be able to be plentiful during the time of harvest occurs during the down markets or the equivalent of seasonal winter and non-growth of the calendar cycles.

Investors need to view the down turns as an opportunity to prepare the portfolios for the eventual return of the harvest cycle.  For investors, this fertilizer can be added either as an additional amount of money saved into stocks or rebalancing the portfolio to take advantage of the downturn in stock prices. We have discussed in other posts the real value of having set target allocations to be able to know when the portfolio needs to be rebalanced such as during market downturns.  You can read this post here: Stay Disciplined with Your Plan

The key behavior for investors is to understand that just as the spring season will bring warmer weather to us in the Northeast so too will the stock market return to bring their investors the harvest as the stock market always recovers.  The history of the stock market demonstrates the temporary declines are just that – temporary.  While at times these downturns are severe, known as bear markets or loss of over 20%, the growth of the stock market has been profound over the last 50 years. It is at times hard to believe that the S&P 500 index (which represents the 500 largest U.S. publicly traded companies) has increased from 180 in March 1985 to over 2,000 in March 2015.  Now that is an abundant harvest!

For those who have been able to take advantage of these down markets by fertilizing their portfolio with additional shares of the great companies of the U.S. and the world, they have been able to reap strong harvests.

The key for the investor is to understand seasonal changes are more important than the daily makeup of our weather at the moment.  The daily financial news describes what is currently taking place, but does little to help the long-term investor be prepared for future harvests.  It doesn’t matter if the current cycle is particularly cold or particularly wet, the summers will be warm in the Northeast and the winters will be cold and futile.  Prepare both your investment portfolio and yourself for the ongoing harvest cycles.

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About Dan Crimmins

Dan Crimmins, co-founder of Crimmins Wealth Management, is a financial coach and fee only financial planner. Have a financial question? ASK DAN

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