What Farmer Joe Can Teach Us About Investing
Forget Warren Buffett for a moment. The common-sense way my Grandpa Joe ran his farm holds plenty of investment lessons.

You can learn a lot about finance from a farmer.
I know I have. My Grandpa Joe was a farmer. So was my business partner at one time. And I’m pretty sure the “field knowledge” they gained over the years holds as much value as anything I’ve heard from Wall Street investment gurus or famous media pundits.
It’s remarkable, really, how similar farming is to finance. Here are a few of my favorite takeaways, courtesy of Grandpa Joe:

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Make sure your crops are paying rent.
When you’re a farmer, you depend on the crops you plant to provide income, and the same thing is true for investments. Because dividend-paying stocks allow you to earn income without selling your stake in a company, they can be an important part of a long-term investment plan. It’s up to you to decide whether you’ll take those dividends or reinvest them — just as Grandpa would put part of his profits back into buying more seed.
2. Don’t overlook the importance of the root cellar.
Big old barns have their place on the farm. But the truth is, the barn is vulnerable. In a storm, the roof can collapse or blow off — and out goes whatever you have inside. The root cellar, on the other hand, is stable; it’s where you stash the things you want to keep secure. In financial planning, we talk about building a solid foundation for retirement with reliable income and safe investments. The roof is made up of more moderate- and high-risk investments, which are likely to be the first to go when things get turbulent.
3. Keep the fields healthy with crop rotation.
In farming, growing the same crop in the same field again and again depletes the nutrient balance in the soil. That’s why farmers periodically rotate in something different — soy beans in place of corn, for example. In finance, moving money from one industry sector to another in search of growth and/or value can be part of an investor’s overall strategy for building a stronger and more diversified portfolio. Why limit yourself when there are so many asset classes and sectors to choose from?
4. Don’t put all your eggs in one basket.
It’s pretty clear what happens if the bottom drops out of an overloaded basket on the farm. But what about in the market? Advisers preach diversification, yet we regularly see investors with redundancies in their portfolios. Talk to your financial professional about eliminating any overlap in your mutual funds and ETFs, and about rebalancing at least once a year to get back to your target allocations.
5. Keep the fox out of the henhouse.
Sneaky predators are a real problem on the farm — and in the world of finance. Keeping your money safe isn’t easy — and volatility isn’t your only foe as an investor. There could be a slew of hidden fees feasting on your nest egg, from administrative fees to imbedded capital gains. If you’re only looking at the bottom line on your investment statements every month, you’re missing a big part of the picture.
6. Pay tax on the seed, not the harvest.
If all goes as expected for a farmer, the season’s yield will be substantially more valuable than the seed it grew from. As an investor, you have the same goal: You’re in it for the growth. Which means you should be careful if you’ve been putting all your savings into a tax-deferred retirement account. Yes, you’re lowering your tax bill now, but when you withdraw that money in retirement, you’ll end up paying income taxes on your contributions and earnings. Don’t depend on the popular (but often incorrect) notion that your tax rate will be lower in retirement. Talk to your tax professional about what your situation could look like and ask your financial professional about the advantages of a Roth IRA.
7. Pruning stimulates growth.
With proper pruning, you can create a better plant — and so it goes with your investments. Every stock doesn’t have the same shelf life, and a buy-and-hold strategy doesn’t necessarily mean handcuffing yourself to a particular purchase. It’s OK to take gains when appropriate, and to buy when prices are low. It can make your portfolio healthier and rid you of products that no longer have a purpose.
8. Don’t lick your calf over twice.
OK, gross. But in Grandpa’s day, this meant having to do a task over again because you didn’t get it right the first time. For me, it means sitting down and putting together a comprehensive retirement plan that suits a client’s needs and goals. Yes, you may have to do a little tweaking here and there over the years. But a good plan will help you stay the course through good times and bad.
Most of all, Grandpa Joe knew being successful at anything took diligence and patience. Whether you’re a little bit country or a lifelong city slicker, that same philosophy applies to building the retirement lifestyle of your dreams.
Kim Franke-Folstad contributed to this article.
Investment advisory services offered only by duly registered individuals through AE Wealth Management LLC (AEWM). AEWM and Olson & Wilson Private Capital are not affiliated companies. Investing involves risk, including the potential loss of principal. Neither the firm nor its agents or representatives may give tax advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 749931
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Joseph R. Wilson III is a partner and co-founder of Ohio-based Olson & Wilson Private Capital (www.owprivatecapital.com). An Accredited Asset Management Specialist, he has passed the Series 7, 31 and 66 securities exams and holds life and health insurance licenses.
-
The Retirement Bucket Rule: Your Guide to Fear-Free Spending
Forget market declines or rising inflation. With this strategy, you won’t have to worry about any of that during retirement.
-
How Big Will the Fed Rate Cut Be This Fall?
A dismal July jobs report has lifted expectations for fall rate cuts. But just how low could the fed funds rate be by year's end?
-
Five Ways to Maintain Charitable Giving During Volatile Times: A Giver's Guide
When the economic outlook is uncertain, charitable giving is even more important — and impactful. You can be strategic by using donor-advised funds, diversifying assets and prioritizing unrestricted gifts.
-
Avoid Medicare's 'Shadow Tax' With This Financial Expert's IRMAA-Busting Tips
You're cruising along in retirement, and then bam: Your Medicare premiums soar because your income crossed the limit. Take a breath. There could be a solution.
-
Grilling Season and ETFs: There's More Than One Way to Cook Up a Portfolio
Exchange-traded funds come in a multitude of 'flavors' these days, from passive to active to factor-based. Their flexibility is what makes them so delicious.
-
You Don't Want It, But You Should Plan for It Anyway: An Expert Guide to Long-Term Care
Planning for long-term care is crucial to protect your independence, family and financial stability against unexpected health events and rising care costs not covered by standard insurance.
-
Five Questions to Help Ensure a Happy, Secure Retirement
You need to drill down to what you really want out of retirement. Then you can get down to the business of crafting a financial plan to make it happen.
-
I'm a Financial Adviser: This Is How You Can Save for Big Goals Even if You Feel Like You're Barely Getting By
Learning good financial habits — building an emergency fund, paying down debt, saving consistently — gives you flexibility, options and a path to security.
-
How to Buy an Annuity Online (Without Regret)
You should never be rushed into buying an annuity. But now that they can be sold quickly and easily online, you need to be more alert than ever to pushy salesmanship. Here are four signs you're working online with a professional.
-
How Much Income Will an Indexed Annuity Get You? An Annuities Expert Lays Out the Numbers
Guaranteed lifetime income sounds great, but how much will it be? Several factors determine your future payout on indexed annuities with an income rider.