Be an Investor, Build a Garden

From 161-180 AD, Marcus Aurelius was the emperor of Rome. He led with wisdom, discipline, and a commitment to Rome. He would think about the long-term, meditate, and take his time before making important decisions. After he died, he was succeeded by his son, Commodus, who was reckless, egotistical, and neglected Rome. He was quick to make decisions and focused on short-term gains, which ultimately led to the draining of Rome's wealth and the start of the empire's decline.

Why start a blog on investing with a story of two emperors of Rome? It's a great example of what is happening right now on Wall Street. Wall Street once had great examples of investors. Warren Buffet and Charlie Munger, for instance, were wise, well-read, long-term thinkers who were slow to make important decisions that required time and thoughtful consideration. Today, these role models are being replaced by emotional, fast-acting, reckless, and short-term thinking investors.

This is a problem. Regular investors are bombarded with emotional media that shifts opinions as quickly as the market itself. They are scared, and fear drives them away from becoming wise investors. The heads of investing, such as academic teachers, are promoting tactics based on emotion and speculation, instead of teaching patience and sound thinking. They encourage buying when the market is up and selling when it is down; investing in speculation rather than in stable companies; focusing on short-term losses instead of long-term gains. When someone does something different, they are often labeled as an idiot and dismissed as someone not to be taken seriously.

Howard Marks, co-founder of Oaktree Capital Management, gave a lecture at the Auditorio Azul of the Fundación Juan March in Madrid back in May of 2019. In his lecture, he showed a slide with the following quote: "It's important to practice 'contrarian' behavior and do the opposite of what others do at the extremes." Wall Street would look at a comment like this and shame any investor who claims that what Wall Street does in certain situations is actually the opposite of what a wise investor should do. However, if a person can listen to Marks' quote and apply it, they can protect themselves from making emotional decisions.

Another reason why these so-called "role models" are problematic is that hardworking people who are searching for someone to manage their wealth might find someone who fits Wall Street's definition of a good investor and trust them. Although someone who chooses one of these managers may see average gains that likely lag behind the S&P, someone who seeks out a manager who follows the footsteps of Warren Buffet, for example, can expect excellent results.

With all this in mind, a natural question arises: How can regular people refuse to be influenced by "investment leaders" and academia forcing their opinions down their throats? The answer is simple. To break free from this cycle, investors must adopt a mindset of patience and discipline, one that mirrors another timeless process: gardening.

Picture a big, colorful, beautiful garden that produces lots of great-tasting fruits and vegetables. In order for a garden to reach that stage, there are a few steps that must be taken. Preparing the soil is the first step. Next, the seeds must be planted at the right time. After planting, they must be watered, and once they sprout, they must be carefully managed and cared for. As the plants grow, weeds may appear. A gardener must be able to recognize weeds so they can remove them without accidentally pulling out the plants. After these tasks are completed, the gardener waits patiently, continuing their daily gardening duties until they have a garden that bears abundant fruit and vegetables.

In the same way, an investor can put themselves in the shoes of a gardener. Preparing the soil is the first step an investor must take. They need to gather financials, learn about the people running the company, and collect any other relevant data. They must then read and analyze this information using both quantitative and qualitative methods to determine if the company is a worthy investment.

The next step is to plant the seeds and water them. After an investor decides on a company, they must invest capital. But the job doesn't end there. Just as a gardener waters the seeds and cares for the plants as they begin to grow, an investor must monitor quarterly earnings and financial statements. They must stay informed about what's going on with the company.

As the plants grow, weeds begin to form. After purchasing shares in a company, news articles will emerge, causing investors to doubt. Wise investors know what is worth paying attention to and what is not. They remain confident in their investment and discard any misleading or incorrect information from the media or other sources. An emotional investor, on the other hand, will see these articles and panic, making hasty decisions that lead to selling stocks—much like an uninformed gardener might pull out his crops instead of the weeds.

If all these steps are followed, both a gardener and an investor can reap the fruits of their labor. A gardener will have a garden filled with plenty of fruit and vegetables, and an investor will have a portfolio that is growing steadily.

A common misconception people face is that they must have a college degree or work on Wall Street to be a wise investor. The opposite is true. With the right preparation and enough time spent refining skills and knowledge, just as anyone can become a gardener, anyone can also be an investor—at least, anyone can recognize what makes a good one.

Be an investor, build a garden.

-Landon Schumer