April 22 ws Earth Day. First observed in 1970, Earth Day has evolved into an international celebration to support clean air, clean water, and other measures to protect our planet. As an investor, what lessons can you learn from this special day?
Consider the following:
Avoid “toxic” investment moves. Earth Day events show us how we can help keep toxins out of our environment. If you want to keep your investment ecosystem healthy, you need to avoid making some toxic moves. For example, don’t chase after hot stocks based on tips you may have heard or read, as they may not be appropriate for your goals or risk tolerance. Another toxic investment move involves trying to “time” the market — that is, buying investments when they reach low points and selling them at their peaks. It’s a great theory, but almost impossible to turn into reality, because no one can really predict market highs and lows — and this may involve selling investments that could still help you.
Reduce, reuse, recycle. “Reduce, reuse, recycle” is a motto of the environmental movement. Essentially, it’s encouraging people to add less stuff to their lives and use the things they already have. As an investor, you can benefit from the same advice. Rather than constantly buying and selling investments in hopes of boosting your returns, try to build a portfolio that makes sense for your situation, and stick with your holdings until your needs change. It might not seem exciting to purchase investments and hang on to them for decades, but that’s the formula many successful investors follow.
Plant “seeds” of opportunity. Another Earth Day lesson deals with the value of planting gardens and trees. When you invest, you also need to look for ways to plant seeds of opportunity. Seek out investments that, like trees, can grow over time. All investments carry risk, including the potential loss of principal, but you can help reduce your risk by owning a mix of other, relatively less volatile vehicles.
Match your money with your values. Earth Day also encourages us to be conscientious consumers. So, when you support local food growers, you are helping to reduce the carbon footprint caused in part by trucks delivering fruits and vegetables over long distances. Similarly, you might choose to include socially responsible investing in your overall strategy by avoiding investments in certain industries you find objectionable, or by seeking out companies that behave in a manner you believe benefits society.
Earth Day is here, and then it’s gone — but by applying some of its key teachings to your investment activities, you may improve your own financial environment.
