“Hey Dad, what’s the Christmas Tree Effect in investing?”

(Opening an account with Fidelity Investments using any link on this page, I may receive compensation. I have several active accounts with Fidelity Investments)

It’s something that I made up to make a point, kids:

Did you know that according to the National Christmas Tree Association, it can take as many as 15 years to grow a tree of typical height (6 to 7 feet)? Also, did you know that across the United States, you can find more than 35 different species grown for their Christmastime appeal. “Yeah, me neither”

With respect to the “Christmas Tree Effect”, I identify the seedlings of the different species as the different investment types. And I identify the brokerage firm as the farmland for planting those seedlings. You, my friend, are the farmer, unless you turn that responsibility over to the farm hand, the Certified Financial Planner (CFP).

Certain species of christmas tree, like certain types of investments, are more desirable and can potentially generate larger returns. Did you know?: the top-selling Christmas trees, as reported by growers across the United States, are the Fraser fir, Douglas fir, balsam fir, and silver fir, in that order.  Did you know?: the least desirable christmas tree is the Scotch Pine.  From a planting /investment standpoint, I’m guessing that you wouldn’t want to be investing in Scotch Pine seedlings, “now would you?”

Hopefully, by now, you’re getting the picture:

1.     You need to identify the best farmland to plant your seedlings (example: Fidelity Investments)  

2.     You need to buy the seedlings that will yield the best return (invest in the best performing investments)

3.     You need to be patient and let your seedlings grow over a long period of time

4.     You need to continue to buy and plant more seedlings on a consistent basis for your future

Imagine that someone agrees to give you one “free” seedling for every one seedling you agree to plant.  That’s called the “401k match!” Why wouldn’t you take advantage of that deal?

Now there’s only one thing left for you to do.  Identify the best performing investments and start investing. (“I guess that’s 2 things”)  If you are not comfortable with doing that, you can always reach out to the “farm hand”.  They will be happy to help you design an investment strategy that fits your needs and investment personality. 

Whether you choose to pick your own investments or have a CFP do it, you need to monitor the performance of your portfolio at least twice a year (“I check mine every quarter”). If the market has been good for an extended period of time and your portfolio is down, it’s time to ask the farm hand some questions and/or make some adjustments. Hold yourself and/or your CFP accountable. If your portfolio is performing at or above the market performance, pat yourself on the back or send your CFP some homemade chocolate chip cookies.  We will look at how to evaluate the performance of your portfolio in another blog.

IMPORTANT: Never invest in anything that you don’t understand regardless of who presents the idea!

Below is my farmland of choice:

Question: Can I trade stocks, mutual funds, and ETF’s on your own at Fidelity Investments without a stockbroker?

Answer: Absolutely!

Question: Are stocks, mutual funds, and ETF’s trades free at Fidelity Investments?

Answer: Absolutely!

Question: If I don’t have enough money to buy a full share of a stock, can I still get exposure to that stock at Fidelity Investments?

Answer: Absolutely! That’s called “partial shares”. You purchase a dollar value of a stock instead of a specific number of shares

Click on Fidelity Investments, for more details, open your free account, and start investing for your future, today!