I have written before about how meditation is similar to investing, but I have changed my mind, I think dividend investing is more similar to vegetable and fruit gardening. There are more dividend investing and gardening similarities than I thought there would be.
This was the first year that I had a raised garden bed. I learned a lot in this first year and made plenty of mistakes. I can see how addictive gardening is, just like how addictive dividend investing is.
You put in your seeds in (while making sure you plant them at the right time, just like making sure you are buying your dividend companies at the right time) and you wait a while to make sure your seedlings sprout (the ex-dividend date), and then you can harvest your vegetable or fruit (the dividend). You can even use your seeds to make more seeds, like a Questrade drip.
Here are six other ways why dividend investing and gardening are similar.
You Have No Clue What You’re Doing At First
For both dividend investing and gardening, I found that information online was a bit overwhelming. So as a novice, I talked to my friends who liked gardening and asked them for tips. She told me that since it is the first year that I will be using the soil, I won’t need new soil.
Turns out, you’re supposed to get nutrient rich soil (read- manure of some sort) and fertilize regularly. No wonder my carrots were smaller than baby carrots and my lettuce were so pale green looking. Whoops…..I’ll be doing that for next year’s garden.
I thought gardening would be simple, so I grabbed a few packages of seeds and followed the directions. After the seedlings sprouted, I was supposed to thin them out but then I ran out of space and had to stagger them. Everything ended up a bit messy. Now I know why there are people who plan out their garden and actually have things that look like AutoCAD drawings of their gardens.
Both Take A Lot of Work
Each vegetable or fruit plant is like a business, or a company. Each business or plant has things that you need to be aware of, or watch out for. There are risks. For example, some of our snow pea plants just abruptly turned yellow, and some the snow peas suddenly curled up and withered and then there were no more snow pea plants. Turns out there are fungi that can infect your pea plants and cause them to turn yellow and die.
On the dividend investing side of things, there are things that you need to be aware of or watch out for too… like COVID-19! REITs did not expect to collect such little rent during the COVID-19 pandemic. The Keg Royalties Income Fund didn’t expect to have to close down their restaurants during the pandemic, and were proactive by slashing their monthly dividend paid to investors to $0.035 from $0.0946.
Both dividend investing and gardening take a lot of work and time to track your expected yield, and to analyze annual reports before investing, and for example, to research the next dividend stock that meets your stock screener requirements. On the gardening side of things, it takes time and energy to water your plants on a daily basis during summer, yank out invasive weeds, and prune the plants.
Reading up on dividend investing is similar to reading up on what manure to use in your garden.
Yield is Small but Value is High
Another way that gardening and dividend investing is similar, is that when you start off, your dividend yield is small, but the value placed on that passive income is very high. We have two strawberry plants that produced strawberries, and they were delicious. Of course, we didn’t get that many strawberries out of the strawberry plants (basically everything it produced, my toddlers ate) but knowing that you grew them yourself is such a satisfying feeling. The value on that is high.
Strawberries from the garden.— Genymoney.ca (@genymoneyca) June 17, 2020
High value pic.twitter.com/cZdYXOuBIZ
Also, each potato sprout we planted yielded about one or two potatoes. As I said, not much yield, but harvesting potatoes is a high value activity. I have never dug potatoes out from the ground before, but the joy you get from rooting your hands and shovel in the soil looking for potatoes is pretty amazing. My toddler was shrieking for joy when we found potatoes, you would have thought we were digging for real gold.
The mashed potatoes for dinner that night tasted fantastic, they were so fresh.
You Can’t Help but Compare To Others
Comparing your portfolio to other people’s dividend portfolios can both pump you up and give you inspiration. I think this is why the dividend investing Twitter community is so prolific, and why there are some many great Canadian dividend investing blogs out there.
On a regular basis I would walk and check out the community garden for inspiration to see how other people’s snow peas or snap peas are doing, or what kind of vegetables and fruit seem easy to grow. I think I’ll try growing zucchini next year, the leaves look so pretty!
You Feel diSappointment
It’s hard not to take your ego out of dividend investing and gardening. With dividend investing, you hand selected your dividend portfolio and spent time with your asset allocation to minimize risk and maximize gains. When a dividend cut happens, you can’t help but feel disappointment and can’t help but wonder why you invested in that company when the business model was not ideal.
When what you grew doesn’t look like what you would expect it to look like, you end up feeling disappointed. Our carrots were a disappointment, our lettuce was a disappointment (but still edible, so that’s a win), and our kale didn’t grow as big as I would have liked it. I pulled up the garlic scapes and I found no garlic. Later I found a small garlic bulb that was about 1/4 the size of a normal garlic.
Sure, I was disappointed, but they were good lessons for what to do next year. There have been plenty of disappointments with my dividend portfolio and the numerous cuts especially during COVID-19 since it was out of my control, but they were good learning lessons to focus on companies that are more recession proof.
It Takes Time and Experience
Finally, both dividend investing and gardening take time and experience build up your income generating assets. Experience is the best educator, as evidenced by Guy Spier’s The Education of a Value Investor.
Our seven blueberry plants cost around $150 in total, and in our first year, we yielded about a few pounds of blueberries.
I would say the yield we got in year one was around $5 (let’s say they are $2.50/pound for blueberries). That’s a 3.33% yield in the first year producing two pounds for the blueberry plants, not too bad! We got a $5 dividend payment of blueberries.
Over time, the blueberry plants will get larger and there will be more blueberries ‘paid out’. Thus, the blueberry plant will become more profitable and the yield on cost will be even higher. The compounding works, even in gardening.
Alternately, you could outsource the rebalancing with something like Passiv. With the gardening analogy it would be like hiring someone to help you weed and to replace the manure in the soil.
Hope you enjoyed my analogy of how dividend investing and gardening are similar. Tom from Dividend Diversify also thinks investing is similar to gardening, but he finds it similar to flower gardening.
You may also be interested in:
Do you have a garden? What were some of your lessons learned from gardening?
What are some lessons you have learned from dividend investing?
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.