April 23, 2021

Investment Diversification

The most obvious form of investment diversification that most people think about is related to their finances. You may be diversified in your stock portfolio or you may own different asset classes, like stocks and real estate. However, I have a much broader way that I approach investment diversification in my business, savings, exercise, and in my garden.

Business Investment Diversification

My business, OptSus Marketing, builds and maintains WordPress websites. This includes short-term development projects, long-term maintenance agreements, and medium-term marketing retainers. Each of these services brings in revenue for the business, but the type of revenue is very different.

Short-term development projects allow my team and I to apply our skills to a specific problem that a client is facing. Once that problem is resolved, the revenue stops. This is what causes the peaks and valleys of revenue which cause a lot of businesses to close. It's very difficult to build a business entirely on short-term project work, but these projects can be the easiest way to start developing a relationship with clients. From the client's perspective, it is much smaller risk to hire a new company to solve a specific problem than to enter a long-term agreement with an unknown business.

Once that relationship is established and new clients begin to trust my team and I to deliver results, we discuss medium-term marketing retainers and long-term maintenance agreements. These create a foundation of recurring income which allows my business to plan for future growth and for my team to rely on recurring income to pay their bills at home.

In addition to client work, we are also establishing a foundation of agency-owned assets. These are websites which leverage our skills to generate multiple revenue streams for the business. The combined passive and active income helps diversify the business so it is not entirely dependent on client retainers. Not only do we build and maintain WordPress websites for clients, we do this work for our own business as a way to diversity the revenue for the business.

Since the entire company is build with location independence as a central pillar, the whole team can work from anywhere there is internet access. This allows us to move around the world freely and take the means of production with us. In the past, this form of geoarbitrage was only accessible to corporations. Today, there is a growing number of people that can live in one part of the world while deriving their income from an entirely different place on the planet.

Savings Investment Diversification

Moving to my personal savings diversification, I have high-risk retirement savings in a Roth IRA. This is paired with very low-risk savings account and low-cost real estate which removes monthly rent costs and provides an appreciating asset.

Since I hope to receive outsized gains with my high-risk investments, this is done within my Roth IRA so I can avoid paying capital gains taxes on those investments. Instead, I have paid the taxes on that income before putting it into my retirement account.

The money in my savings account does not earn enough interest to even mention. Actually, it is loosing value against inflation. However, it provides a level of security against unexpected expenses. Additionally, when the savings account reaches a sufficient sum I can convert that into other assets with better returns. For example, if the stock market suddenly crashes I can move some of the money in my savings account into the market to take advantage of that buying opportunity. Also, if my house needs a major appliance or significant repair I can dip into savings without taking on additional debt.

Lastly, I am saving money by avoiding rent and starting to build a portfolio of real estate. Anyone that has been keeping up with my activities for a few years will remember my Lake Royale Project from 2015 and the update to that project in 2016. In summary, I bought a camper and used it as my home so my cost of living was reduced by 80%. Today, I have sold that first camper property, bought a second camper property, and purchased another property closer so my wife can earn a graduate degree in Molecular Biology. This is a significant change from six years ago when we were paying rent, working dead-end jobs, and barely paying our bills.

Exercise Investment Diversification

The focus of my exercise routines is to support mobility because this is a vital component of aging. To this end, I focus on functional training. That is, I engage in activities which stress my body through the natural movements of my body. Rather than running on a treadmill in an air conditioned gym, I run on country roads outside my house. In my garden, I use hand tools, like an axe rather than a chainsaw. While I work from my computer, I take frequent breaks to walk in my garden and tend my property daily.

Modern conveniences are great and I am far from a luddite in my use of technology. However, I find it odd that so many people spend time and money avoiding manual work only to spend more time and money for a gym and personal trainer. One of the most important things I get from my garden is not the vegetables, it's the tons of mulch, compost, and branches that I have moved using a pitchfork, shovel, axe, and wheelbarrow. I don't go to the gym and do farmer's walks with dumbbells. I fill up a couple five gallon buckets and water the trees and bushes around my property. More than that, I do this during a break between meetings so I don't spend my entire day sitting at a desk, hunched over a keyboard.

Last fall, I wanted to add mushroom logs to a section of woods at the back of my property. Rather than buying a chainsaw, I used an axe and hand saw. It took me a week, but I got my mushroom logs and a good workout. Maintaining this property will require pruning trees, turning compost piles, raking pine needles, distributing mulch, pulling weeds, and planting the annual vegetable garden. That's a lot of lifting, pulling, walking, and bending that won't be done in a gym.

Garden Investment Diversification

Since we're talking about the garden, that too is an example of investment diversification. On the property, we have long-term perennials, short-term annuals, livestock, and multiple varieties of each species. This produces an abundance of food and resources.

The long-term perennials have been a focus for these first two years on the property. I'm sure I will add more in the future, but I have tried to bring in most of the perennials as we first moved here. This is because things like asparagus, apples, peaches, figs, blueberries, olives, avocados, grapes, and the other perennials will take between one to five years before they produce any significant harvest. Putting these plants in now means that the yields from this property will compound over time.

Similar to the compounding yields of perennials, I started with two forms of "livestock" that most people don't consider. The first is my compost pile which supports the soil biology. This isn't considered livestock but it is alive, so I'm including it in this discussion. This property has mostly been a lawn which has been mowed, fertilized, and treated with insecticides over the years. When we moved here, the fertilizer and insecticide application stopped and we began supporting the microbiome of the soil. In addition to the compost pile and tumbler, we started a worm bin vermicompost system. The worms were our second "livestock" investment.

After the compost and worm bin were setup, we moved on to more common forms of livestock. Our 1/3 acre pond was stocked with bass, bream, catfish, and grass carp. The carp are there to eat the algae that covers the surface in the spring. All the fish will help balance the pond ecosystem while providing food for us and fertilizer for the garden. The muck at the bottom of the pond and the algae are both added to the compost systems on the property. Additionally, the duckweed can be used a poultry feed. This leads to the latest livestock added to the property, chickens producing eggs for our breakfast.

Throughout the property, we have multiple varieties of each plant or animal. I already listed the types of fish. We also have three kinds of chickens, two kinds of worms, three varieties of grapes, two varieties of avocado, three varieties of olive, five varieties of strawberry, and six varieties of blueberry. There are many more plants and varieties of each, but you get the idea from this short list. By selecting multiple species from each genus we have diversified the garden to protect against pests, disease, and reduced yields.

Another interesting aspect of diversification with each genus is the ability to place multiple grafted varieties on a single plant. For example, I have grafted edible pears onto a Bradford Pear tree. Within the prunus genus you can graft plums, cherries, peaches, apricots, and almonds. All of these can be grafted onto a single tree. This is one of my long-term projects for the property and I have begun work to create trees with these multiple grafts.

My business, savings, exercise, and even my garden are all examples of investment diversification. Each of these yields short-term, medium-term, and long-term rewards from my investment portfolio.

Have a question? Just contact me.

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