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Kelly Ruggles is the author of "The Financial Playbook" for Retirement.
Kelly C. Ruggles, Financial Planner and Educator

Articles by Kelly Ruggles        Back to Article Main Page

March, 2007
What's Your Potato? - Cultivating a Clear and Reasoned Investment Plan

For South American natives, the potato played an important roll in their lives and culture.  Archaeological evidence points to the use of the potato in their religious ceremonies, medical treatments, expressions of art, and as an important food source.

For example, to preserve a potato for long periods of time, they exposed it to the night's freezing temperature conditions.  The next morning, they stomped upon the potato to remove trapped moisture.  They repeated the process for several days until it proved completely free of moisture.  The method resulted in a food product that could be stored for many years.  Thus, it was imperishable.

South American natives knew the appropriate process to preserve potatoes and they created specific methods for their survival.  They developed strategies to perpetuate their future and kept with long term plans for the continuation of their people.

Ask yourself this question:  What's your potato?

What's YOUR Potato? What do you depend on to cultivate your savings and investments? What is your long term strategy for you and your family?

What do you depend on to cultivate your savings and investments?  Are you keeping your fingers crossed and hoping for a better day or are you proactive with your allocation of assets and abide by precise strategies.  Furthermore, do you pass along prudent advice to your family or do you exclude them in your planning for the future? 

Undoubtedly, amendments will be necessary as you achieve your goals and move forward, but the overriding theme of your long term plan should produce diligence and confidence.

Depending on your financial objectives, certain variables may affect your investment strategy such as the current equity market (both domestic and international) and the current fixed income market. 

Growth oriented investors find the markets frequently subscribe to the relationship between supply and demand.  For the purpose of this article, disregard for a moment information on company earnings and economic conditions.  Focus on the perceived status of the overall equity market as buyers versus sellers.  Depending on the nature of the two groups, does the market carry an offensive or defensive bias?  With the assistance of your financial professional, a review of the current market environment will be time well spent.

Dividends and yields represent two important components for fixed income investors.  With interest rates on the rise, fixed income investors may have several questions.  Common questions include:  ìWhat term is best for my unique circumstances?î and ìWhen should I expect the interest rate hikes to end?î  It is natural to wonder where interest rates go from here and if short term or long term vehicles provide the best value.  This is where your financial plan and financial professional offer constructive direction and advice.

If you feel that your portfolio contains the trapped moisture of an exposed potato, a review of your overall plan may be in order.  Like the weather and the harvesting of crops, unexpected circumstances often affect the direction of your course.  Emphasis should be placed on your goals, objectives, time horizons, and risk tolerances.

South American natives knew the importance of adhering to a plan.  The plan included techniques passed along from generation to generation and they maintained a prescribed approach for a secure future.  The legacy of an investor starts with a keen awareness of future needs.

After the Spanish traveled to South America in the early 1500's, the adventurers returned to their homeland and introduced it to others.  The potato finally made its way to Ireland in the 1600's where the Irish learned it grew exceptionally well in their country.  Although it is not indigenous to Ireland, we all know the story of the Irish potato famine.  Generation after generation relied heavily on it for years as it proved an important part of their diet and welfare.  The Irish population grew and some depended completely on the potato to feed their families.

As an investor, ask yourself again, what 's your potato?

What do you depend on most to advance your financial prosperity?  It is wise for all investors to understand the array of choices available in constructing a proper asset allocation model.  There may be investments you should introduce to your current plan that will compliment its structure.  Furthermore, do you understand the risks associated with each investment you own and do you have a plan in place if a component in the allocation falls short of expectations?  Remember, the universe of investments is constantly evolving and the financial industry introduces new ideas frequently.  Stay on top of the changes by tapping into the knowledge of your financial professional.

As for the potato, history proved the Irish put tremendous faith in the potato crop.  Perhaps they put too much faith in it.  In 1845, the potato crop showed signs of disease.  Leaves withered and potatoes blackened.  Acres upon acres of crops produced nothing more than rancid, soggy potatoes.  The fungus soon spread across many of the potato fields and resulted in blight and widespread famine. 

As the famine continued over the next several years, the Irish people faced situations of panic, anger, and compromise.  Panic stricken people left their country by the hundreds of thousands.  Others stayed and faced exceptionally high mortality rates.  Starvation and malnutrition resulted in dysentery and other diseases.  In the meantime, anger gripped many of the Irish people as economic conditions forced the continuation of grain exports to other countries.  Riots over the food exports soon occurred.  To feed, cloth, and shelter their families, people took up undesirable work for low wages.  A proud and self-sufficient people turned to begging and compromise.  After years of suffering, Ireland's population decreased by approximately thirty percent; the actual numbers are one of debate.

What can we learn from this sad time in history? 

A highly concentrated position is undesirable.  Should an investor's portfolio become too dependent on one position, the investor must be willing to accept adverse conditions along with irrational fluctuations in portfolio values.  Imagine a sudden decrease in price or dividends at your time of greatest need, such as retirement.  Proper preparation with a diversified portfolio may be the most important decision you make with your savings.  Understand the answer to ìWhat's your potato?î and you will begin to nourish your prosperity.

 


©2007, Kelly C. Ruggles | Sitemap | Disclosure
Kelly C. Ruggles, President of American Reliance Group, Inc., is a registered investment advisor. Mr. Ruggles is the author of "The Financial Playbook" for Retirement.

Mr Ruggles does not intend to provide personalized investment advice through this publication and does not represent that the strategies or services discussed are suitable for any investor. Investors should consult with their financial advisors prior to making any investment decisions.