Holes And Mud Balls

Posted by admin on Dec 2nd, 2009 | no comments

Every fall, my neighbor organizes an annual neighborhood aerator rental. There are about ten of us that pitch in $10 apiece to rent an aerator for a weekend. We did it again a couple of weeks ago.

After wrestling the heavy, jagged toothed behemouth into my yard from the previous user, I was struck by its rather dainty, light blue color. I could only surmise that the designers did this on purpose to lull it’s users into thinking the machine was docile, and friendly to use. Well, if you can imagine what it would be like to push a lawn mower with square wheels across your lawn, you have an idea of how docile it actually was. When I finished my lawn, I wrestled it over to the yard of the neighbor who was next on the list.  As I returned to my own driveway, I was met by my daughter who asked me, “Daddy, why did you make those holes and mud balls in our yard with that big machine?”

“Well Honey,” I said, “it will help make the grass grow better next summer.”  But unfortunately, before I could go on and explain to her what I thought was the deeper science behind proper yard maintenance and aeration techniques, she seemed to be satisfied with my first answer and zoomed away on her bike.

So there I was, left on my own to contemplate the real reasons as to why I aerated the yard…“I’m supposed to,” I thought. “I’m supposed to aerate the yard. People who want a healthy yard aerate it, don’t they?”  Well, that’s what my neighbors told me!  Or were they just telling me that to get me to pitch in for the aerator?  Suddenly, I realized that I don’t exactly know why I am “supposed to aerate the yard.”  I just do it. To be honest, I’m not even sure if you follow the aeration with seeding the yard or “weed and feeding” the yard…what do I do next?  So, without a clear answer for myself, I decided to spend the next two Saturdays raking the leaves.  At least I’m pretty sure that helps the yard.  But again, I’m not sure exactly how.

This little mental dilemma I was in is actually a great demonstration of how a lot people think about investing. Many investors invest because “they are supposed to.” And while investing in something is generally better than investing in nothing, knowing exactly how and why to invest will ultimately give you a stronger and healthier portfolio. Having a specific, long-term investment strategy that is both cost effective and efficient is not something the average investor thinks about when buying investments. Developing and implementing a strategy that increases returns and decreases risk is what extraordinary investors look for when striving for financial success.

The Determinants of Success:

1. A customized plan.
2. Proper asset allocation.
3. Behavior management.

Holes and mud balls are good for lawn care; they are extremely bad for investment portfolios.

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