Edward Jones column: Nourish the roots of your investment strategy

9:18 PM, May 1, 2013  |  Comments
Glenn Helminiak
Glenn Helminiak
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On Arbor Day, which we celebrate this week, people across the country plant trees. Of course, trees provide us with many benefits, including beauty, fruit and oxygen, as well as protection against land erosion. But the act of planting and nurturing trees also can guide our behavior in other areas of life - such as investing.



Here's something else that tree planters can teach us: diversification. Consider an orchard that contains several different fruit trees; its commercial benefits might be greater than a comparable orchard that only grows apples. Plus, the presence of a variety of trees can prove beneficial if disease strikes one type. In some areas of the country, for example, Dutch elm disease wiped out thousands of trees, leaving entire streets treeless. If some other species also had been planted, these streets still would have had the benefits provided by mature trees, even if the elms were gone.

As an investor, you don't want to own just one type of financial asset, such as growth stocks, because if a downturn hits this segment, your entire portfolio could take a big hit. A better strategy would be to populate your "financial orchard" with a variety of investments - such as stocks, bonds and government securities - that are suitable for your situation. (Keep in mind, though, that while diversification can help reduce the effects of volatility, it can't guarantee a profit or protect against loss.)

As an investor, you can learn some lessons from Arbor Day that could prove "tree-mendously" helpful to you as you chart your course for the future - and you won't even have to "go out on a limb" to put these strategies in place.


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