While I was at the Ekka this week helping my Dad out with his cattle, it got me thinking about how two completely different fields can have such similar ideologies. Specifically, it struck me how so many of the principles of farming match the basic tenets of investing.
So stick with me on this!
I believe farmers make good investors because of what they know about farming. Before you say, “What do farming and investing have in common?” let me pose the following for you to think about:
Farmers know that:
- There is a time to sow, a time to be patient and let the crop or cattle grow, and a time to harvest…. just like when investing!
- In farming, there are good years and bad years. During the bad years they pull their belt in and hunker down waiting for the “drought” to break…. just like when investing!
- They can do all the right things, at the right time and due to circumstances out of their control, things don’t work out quite as expected. They know to dust themselves off and get back on the horse…. just like with investing!
- When a drought is in full swing and prices of farms have dropped, they know not to sell the farm just because the value has fallen…. just like with investing!
- Having a few farms in different geographical/rainfall areas can be harder to manage but allows them to spread their risk, as it is a reasonable bet there will be some rain on one of the blocks during a dry time…. just like with investing!
- When they see the price of land now, they wish they had invested in more a long time ago when it was “cheap”….. just like with investing!
Now, farmers generally stick to farming as that’s what they know, but when you consider the above, perhaps they know more intuitively than they expect!
For most farmers to become exceptional farmers it takes years of experience with both good and bad lessons, and so too with investing… that is unless you get great advice from someone who has already done the hard yards.
Have a great month,
Cheers
Ben Law
“The Financial Bloke”