Autumn in northern Virginia is a wonderful thing. The air is crisp; the temperatures still pleasant; and the warm palette of leaves create a truly magical view. When we lived in Brooklyn, we would pack up all the kids in our van and drive upstate a ways just to see the leaves change colors. Now, I just have to look out my back door.
As I look out my back door though, I realized that the leaves I once considered so beautiful, now carpet the majority of my still-green lawn. Our property covers about 1 acre and within our property line loom some 50 deciduous trees (along with a few hollies and evergreens that I consider my good friends right now). The broadleaf trees include oaks, maples, black walnuts, dogwoods and a few others I cannot identify but I know they still drop leaves like Leonard Hankerson drops passes. This is a mature forest and some of the trees tower some 70 feet about the ground. Experts suggest that a large, mature tree may hold 200,000 leaves. That would suggest each fall I need to deal with 10 million leaves!
The good news is that I have a Billy Goat. Not this kind:
But this kind:
This machine is amazing. It not only sucks up leaves like crazy, but it mulches them to 1/10 their original volume, making disposal much easier. We have two large compost pits in the back of our yard where I dump the mulched leaves. Eventually, they turn into nice, rich dark soil that we use in our gardens and other parts of the yard. Over the last two weekends, I cleared the yard twice and dumped about 25 bags full into our compost piles. I suspect that I will be doing this for at least three more weeks until all of the leaves are down.
The trees on our property are truly beautiful and handsomely improve our appreciation of where we live. But, once a year, they require a good deal of work on my behalf.
So what does that have to do with investing? I see my leaf mulching experience much like rebalancing a portfolio. Like a tree, a portfolio can be a beautiful thing, growing and blooming as one would hope. But like a tree, it will need occasional trimming, pruning and sometimes extra care when share prices fall. Unlike the annual ritual of the falling leaves, portfolios may require tuning more than once a year. In my current position, I perform about 360 portfolio reviews each year. Every time I look at a client portfolio, I deploy my best effort to position the portfolio for optimum future growth. I view each portfolio as unique as every one of my wonderful trees. But as in nature, future growth is not assured, and sometimes returns lag the broader indices. Such is the nature of the capital markets.
Yet, I know the best chance of long-term success in investing comes from finding a compatible investment style and philosophy and sticking with it over the long haul. My approach has worked for me for over three decades and I suspect it also will serve me well into the future. Despite this confidence, I acknowledge that any investment style will find itself out of favor from time to time; returns will not be as expected. When one has high conviction in the long-term investment strategy being employed, these periods of underperformance are usually opportunities to increase exposure to the out-of-favor investment approach, not run away from it.