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Viewing Your Portfolio through a Farmers Eyes By Neil Krishnaswamy on April 10, 2012 Share on facebookShare on twitterShare on emailShare

on printMore Sharing Services Did you know that farming and investing share much in common? On the surface these two endeavors may appear worlds apart. But if you look closely at the behavior of a successful farmer, you might find insights which could make you a better investor. This became apparent to me after reading some work by an experienced financial planner named Bert Whitehead1. His insights gave me a new way to look at asset allocation, and perhaps the following 3 farming analogies can give you a fresh perspective on how you view your own portfolio. Equities are the Crops in the Field Having a sustainable crop yield is paramount to a farmers success. This requires planting a variety of different crops like corn, soy and wheat. Diversification is crucial because having just one crop exposes the farmer to too much risk. The onset of a disease could wipe out that crop and possibly bankrupt the farmer. Furthermore, repeatedly planting the same crop each year can deplete the soil of essential nutrients, leading to a lower yield. On the flip side, its possible for a farmer to have excess diversification by trying to plant too many crops. This can result in lower efficiency and productivity. Perhaps you can see now the way crops are very much like equities. As crops provide for the livelihood of the farmer, equities provide the support for an investors portfolio. If properly selected and diversified, stocks can be a very suitable and efficient investment vehicle for achieving growth over the long run. With IAMs goal of investing in ethical and social responsible companies, you might just call our approach organic investing!

great protection against inflation. If food prices rise, the farmer can sustain himself by drawing from the garden. There may also be many flowers growing in the garden which provide beauty and enjoyment. A personal residence can serve the same function for you. For one it can be a great inflation hedge. If you have a fixed-rate mortgage on that residence, you have even greater inflation protection. Thats because interest rates rise to combat inflation. Should inflation arise, you could find yourself paying off your debt with cheaper dollars. Of course we must always consider that more debt brings more risk, and ideally you will want to have an adequate cash position to service that debt if emergencies arise. Besides a house, there are other sources of inflation protection. Gold and inflation protected treasuries (TIPS) fall in this category, although these are not currently recommended options by IAM. Investing in stocks of growing companies is another way to offset some inflation risk. See Rich Erwins article on Finding Growth in Smaller Socially-Responsible Companies. Of course compared to real estate, these other investments are not ones you can live in nor use to grow any flowers! Interest Earning Investments are like the Pantry A prudent farmer will always have a fully stocked pantry. Such a pantry may contain a variety of items like flour, grains, butter and frozen meats. A farmer never knows when lean years will hit due to events such as extreme weather and crop shortages. They need to be able to draw upon the pantry in times like these. Interest earning investments like bonds serve the same function for an investor. Different times in life require protection of capital and reliable income stream to be the most important investment criteria. Ok, so you might not be too excited by the current yields on bonds, especially treasury bonds. But you should remember these, as well as cash, can serve as protection against deflation. In times of deflation, interest rates fall which will cause the prices of your fixed interest investments to rise. Now should deflation be a major concern to you? Perhaps not. But its worth being aware of the risk, even if most pundits say its a small one. Lets recap. The main take-away from these analogies are that the crops, garden and pantry are not competing with one another. They all serve a distinct purpose in a farm. I encourage you to look at the different investments you hold in the same light. Some assets will give you the potential for growth, some can protect you from inflation, and others will provide you safety and deflation protection. Each of you will have your own set of circumstances and risk tolerances which dictate how your portfolio will be weighted to address these concerns. Keep the farming analogies in mind the next time youre faced with an apparent either-or scenario. Suppose you have a surplus to pay off a mortgage or invest? The right path is not necessarily which projects to give you a higher after-tax rate of return. Why not let the answer flow from your target asset allocation. You may not be a farmer, but it might be wise to tend your portfolio as if you were one.

Real Estate is the Garden A farm often has a barn, animals and a vegetable garden. The garden serves as a

1. Why Smart People Do Stupid Things With Money by Bert Whitehead (2007) Important Consumer Disclosure This newsletter is limited to the dissemination of general information pertaining to Investors Asset Management, Inc.s (IAM) investment advisory services and general economic market conditions. This communication contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice, and should not be considered as a solicitation to buy or sell any security or engage in a particular investment strategy. Nothing herein should be construed as legal advice, and you should consult with a qualified attorney before taking any action. Information presented herein is subject to change without notice. Past performance is no guarantee of future results, and there is no guarantee that the views and opinions expressed in this newsletter will come to pass. Individual client needs, asset allocations, and investment strategies differ based on a variety of factors. >Growing your own fruit and vegetables is a healthy, sustainable and highly productive activity. Not only will you exude a healthy glow from spending time in the great outdoors, youll potentially be saving money on your grocery shopping too. Garden organically however, and you and your family wont be the only ones to benefit the environment will profit too. Organic gardening, in its simplest form, means gardening without the use of chemical pesticides and fertilisers. Beyond that, it means working with nature to produce a healthy garden, focusing largely on increasing the natural health of the soil. Below are a few organic gardening dos and donts, courtesy of Garden Organic (also known as the HDRA, the national charity for organic growing). Follow their advice for the very greenest of gardens: Commit to managing the whole garden organically, not just your fruit and vegetable patches. One of the best ways to look after your soil is to make compost. The benefits of good compost are numerous youll be cutting down on your household waste, saving money on fertiliser and helping your plants grow stronger all at the same time. Cardboard, tea bags, vegetable scraps and old flowers are all ideal for composting visit the Garden Organic web site for further compost advice. Use organically grown seeds as far as possible, and avoid any genetically modified varieties. Consider the environmental implications when choosing decking, fencing and landscaping materials. Avoid preservative-treated wood if possible.

Stop using slug pellets there are a number of ways in which you can organically control slugs in your garden. These include laying traps, constructing simple barriers or creating a wildlife garden to encourage natural predators such as hedgehogs and birds. You can save energy and water simply by collecting rain fall, and using that to water your plants. Control weeds without chemical weed killers. Dig the weeds out with an old kitchen knife or similar, clearing as much of the root as possible to prevent regrowth.

CHICKEN How to Start a Chicken Farm Business By Jacky Gamble, eHow Contributor Starting a chicken-farm business requires much more than simply buying some chickens and putting them in a pen. You need to know about the various breeds of chickens and which type you want to raise. You'll also need to know about building a chicken coop, breeding chickens, feeding them and protecting them from predators. Difficulty: Moderately Challenging Instructions 1. o

1 Research chickens. Any potential chicken-farm business owner needs to find out what chicken breeds are available, what chickens eat, how often they produce eggs and how long they live. A plethora of information about chickens is available online and in books. Consider what you want to accomplish with your chickenfarm business when selecting a breed.

Acquire a flock of chickens from a reputable supplier. Search the Internet for chicken suppliers in your area, ask for referrals from current chicken farmers, or inquire at your local feed-supply store for referrals. Sometimes in early spring, feed-supply stores will offer chicks for sale. If you are considering purchasing your flock this way, be sure to ask well-informed questions about where the chicks came from. o 3 Construct a chicken coop to keep your chickens comfortable and safe. Chicken-coop plans and instructions can be found online. Construct your coop to fit all your chickens comfortably. For example, if you have a flock of 13 chickens, your coop will need to be about 10 feet by 10 feet. o 4 Purchase a rooster to keep with your flock of chickens. Roosters keep the hens safe from predators. Do not have too many roosters in one pen, as they will not get along. Do some research to find out how many roosters you should have in your flock. o 5 Have your flock checked by a veterinarian regularly. Regular checkups will help ensure that your chickens remain healthy and viable for egg production.

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