Sunday, July 26, 2009

What Squirrels Can Teach Us About Investing

This is a guest post from Paul Puckett of Beacon Wealth Advisors. Puckett is the author of Investiphobia: You Can Invest Without Fear. This piece originally appeared at his blog, Just Puckett, and I liked it so much that I asked for permission to reprint it here.

Snowy squirrel at Rosings Park (Dec 2008)Here's a little exercise that might be beneficial to your stress level and might even help you with your investments.

No matter where you live in America, there is probably a squirrel in your yard every day. Just for fun, take an opportunity to watch the squirrels today. Maybe take that morning cup of tea or coffee into the yard and sit quietly watching the squirrels at work and play.

Watch them as they stand in line at the little squirrel coffee shop discussing the acorn futures market. As they read the Squirrel Daily's Business section looking for an update on the upcoming acorn tax legislation. Panicking as they hear that there may be an oversupply of acorns driving the price down or a shortage due to climate change. Many squirrels distrust the reporting of other squirrels, so you may notice some watching Fox News!

If you actually see squirrels doing these things in your backyard today, film it and your money worries will be over. But you won't see squirrels doing anything like this.

So go back to your coffee, take a deep breath, let it out nice and slowly, and watch what squirrels really do all day. You may see them stop and enjoy an acorn, or you may see them collecting acorns and running off to hide them. They may have a little fun chasing each other or running off a few birds from your bird feeder.

If you think about it, squirrels are the ideal long-term investors. Every day, they work on their portfolio, harvesting dividends (acorns) that have fallen from their investment portfolio (trees). Some of the dividends are used immediately. They sit back and enjoy a little of their tree's income for immediate consumption.

You may see them reinvesting the dividends by putting them in a little hole where, if not found during the winter, they will ultimately become another income producing investment in the form of another tree. Squirrels never develop investiphobia. Following their instincts, they invest wisely and enjoy the fruits of their labor and their investments. We should be more like squirrels.

So, hop up and chase your neighbor up a tree. Or, get to work and focus on work. When you play, enjoy yourself immensely. Life should be fun. Do this daily and you may find that your portfolio does fine, even when you don't watch it every day, hour, minute!

Money is not your life — it’s simply the means to the life that you want.

J.D.’s note: I just thought this was too cute — and too apt — to pass up. Thanks to Paul for allowing me to re-post this at Get Rich Slowly.

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