You can learn a lot about growing your wealth from the American farmer.
Consider: If you were a farmer in 1920, you plowed with a mule. Seed came from last year’s crop. Irrigation came from the heavens. When the harvest came, you were lucky if your land produced 20 bushels of corn per acre.
Today’s a farmer’s mule is a gas-powered four-wheeler that scoots him all over a thousand-acre spread. Seed is genetically modified with the scientific precision of a breakthrough pharmaceutical. Irrigation is installed and controlled by satellites and computers. Yields of 170 bushels per acre are not uncommon.
Imagine if a farmer from 1922 could tour a farm in 2022. He’d likely need smelling salts!
Ask that 1922 farmer how to get 170 bushels of corn, and he’d tell you to plant eight or nine acres. A farmer today can get that kind of yield from one single acre.
How? Because the secret to successful farming isn’t bigger farma, but better farming.
I see three good lessons here about growing your wealth.
1. Bigger isn’t necessarily better. Smart farmers know that by getting the most from the land they already have, they’ll accrue more capital to buy more land. That’s the order to follow. A better yield, then a bigger field. Quality then quantity.
The lesson for us “non-farmers” is to focus first on the efficiency of your financial plan, not the size of your financial assets. Clients are often shocked when I show them strategies that can help them get more from their retirement “nest egg.”
They thought they needed more assets. What they really needed was a better plan.
2. Risks are necessary—and so is managing them. In today’s complex financial world, trying to avoid all risk can sometimes be the biggest risk. That’s because often, when we think we are avoiding risk, we’re doing so in name only.
For example, the stock market can fluctuate in price, causing an investor to lose money. But money “safely” stored in an account earning little or nothing can lose 50% of its purchasing power during retirement due to even mild inflation!
Yes, the risk of fluctuating prices inherent in the financial markets can and should be monitored and managed through disciplined portfolio oversight. But failing to get the returns made possible by those same markets is to lose your purchasing power…one percent at a time.
3. Time is your friend. There are no certainties in farming. Even for innovative and resourceful American farmers, droughts, floods, and market collapses can (and do) happen.
And yet, even though such dangers are always present, most of the last century has been good for farmers. That’s the benefit of the “long-term.”
The same can be said of the financial markets. There simply are no year-to-year guarantees. But anyone with a history book can see that the march of financial markets in the last 100 years has been up…over time.
Good lessons like these always spark good questions. Like, “What should I be doing financially as I get close to the time of retirement?”
To help you think through such issues, I’ve created a comprehensive checklist of pre-retirement questions for people who are 60-something. It’s free if you’d like a copy. Just email me at bmoore@argentadvisors.com, and I’ll send it to you right away.
Argent Advisors, Inc. is an SEC registered investment adviser. A copy of our current written disclosure statement discussing our advisory services and fees is available upon request. Please See Important Disclosure Information at https://ruston.argentadvisors.com/important-disclosure-information/
