So we moved into our new California home in November. I decided to spend the $600 on 10 fruit trees this month. Why? Because they will make me happy and the future flavorful returns will be worth it. In many ways we are setting roots both literally and figuratively. My wife and I have been together for 10 years come this September. In that time we lived in Boston, Nashville, Buenos Aires, New Orleans, and now California. We lived in 9 places over that time and finally are looking settled. With a kid and job that I like, it seems like the right time. So we bought a house and I am planting trees.
Trees are much like retirement planning. (Please give me a little leeway with this analogy as it is not perfect).
First off we have to decide on the asset allocation.
What kind of fruit do we want? Do we want something that we know will bear fruit (for instance plums in my area)? How about something that is more exotic and may not bear fruit (guava anyone?)? Do we invest in the S&P index funds or do we try and pick individual stocks? With both there is a choice to make. Is the goal to bear lots of fruit that may not be that exciting, or ride the highs and lows of trying to pick individual stocks? For us, we chose fruits we like but that are known to grow here. Luckily, there are a lot of options in California…
When do we want to withdraw our funds?
When planting our trees we had to determine when we wanted our fruit to bear. Different trees produce fruit at different times. There are early fruits such as plums that may bear fruit as early as June and later fruits such as pomegranates that don’t bear fruit until October. We went through and selected a variety of fruit and specific fruit types that will produce us fruit starting in June all the way through November. If we had not planned then we may have obtained all of our fruit at one time (say October) and been stuck with too much. In retirement, planning is also important to understand when the fruits will be produced. At what age can we withdraw money from our IRAs, Social Security, and 401Ks. Can we stagger these plans to get the maximum benefit from each account?
We went straight to the source for our trees
We went to a nursery and bought trees straight from the ground. Bare root trees are younger and have stronger roots. We could directly see the health of the tree prior to purchase by examining it and finding the tree we wanted for our needs. Also, by going to the nursery instead of a store like Home Depot we saved money. Similarly in investing, if we can purchase stocks, etc. directly from a nursery (say through a Vangaurd Index Fund) instead of using a broker, there will be substantial savings and a better understanding of the health of the investment.
We examined and supplemented the soil
Prior to planting our trees we took a soil sample and sent it for analysis to a lab. We learned what was deficient and what was in excess for our soil and how to correct it. In investing, by taking an active role in asset allocation we can determine what is in excess versus deficient in our portfolios and asset mix.
We will keep our eye on the trees going forward
The trees are very visible from our backyard and each day I can go out there, monitor the growth, prune where needed, and just keep an eye on my investment. In investing, by monitoring our assets regularly (whether it is monthly, twice a year, or annually) we can keep an eye on the health of the investments.
So there you have it. We are planting roots….both literally as fruit trees and figuratively through our retirement investments. What do you all think of this analogy?