There are so many similarities between gardening and investing that I can't resist writing about them. First, when I buy seeds for the garden, I expect to get what I ordered. This did not happen last season. The tomato seeds, which I bought online from a Chinese company, were not the variety they advertised. The green bean seeds which I thought were produced in the USA were mixed with an undesirable variety of half-runners. The half-runners are more of a vining variety instead of a bush bean variety. The result was that the half-runners choked-out my Blue Lake beans so I harvested only a fraction of what was expected. I believe, but can't prove, that these too were a product of China, where consumer protections are weak. What irks me is that I paid dearly for seeds that were falsely advertised.
When investing in stocks, the investor should expect to get what he pays for. Surprises are usually not pleasant when it comes to investing. The key is to know the company before hitting the buy button. Often the hype heard on TV from analysts is too optimistic for many reasons. These people are paid to appear and present stock recommendations regardless of the suitability for most investors. They often recommend Chinese stocks in the name of diversification. Remember, the stocks you buy are your seed. In order for you to profit, you must buy quality seed (stocks). Before you invest in any one company, look at other alternatives within that sector. Use tools like ratio analysis, historic earnings and projected earnings to make an educated guess at what would be your best choice. An unusually high dividend yield is usually a red flag. As a company's stock sinks, the dividend yield goes up. More often than not, the dividend will be cut, further lowering demand for the stock, think (AT&T). I have learned to avoid foreign stocks just like I will avoid foreign seeds. My only Chinese stock was recently delisted by the New York Stock Exchange. The result is that I own a stock that I cannot sell. Imagine owning an asset that you can't sell, it virtually has no value. In the future, my only international exposure will involve US companies that do business in foreign countries.
Gardening is hard work. Tilling, planting, fertilizing, mulching, weeding, and even harvesting is strenuous. If I didn't like doing it, I would take up a different hobby. The same goes for investing, if you have no stomach for it, better leave it to an adviser. Just remember that there is a significant cost for their services and you may not get the results you hoped for. Climate change, adverse weather, drought, pests, and plant disease can all contribute to failure in a garden. Changes in interest rates, tax law changes, government policy, and a declining economy can also derail an investment portfolio. Just like there is a time to plant and a time to harvest, there is a time to invest and a time to divest your holdings. Use all the tools listed in this and previous posts to make your best decision.
