Photo: Jon Sullivan. Source: Public Domain Photos
Ocean beaches often have dunes behind them, covered with beach grass – sometimes surrounded by protective fences. The plants grow in lines, strengthened by creeping underground stems that connect them to one another. Over time, the grass thickens and the sand dunes stabilize. This helps prevent coastal erosion.
In Europe, peasants used beach grass for fuel, thatch, and animal fodder, until they realized that using the up the grass caused the dunes and shoreline to shift. Many villages and estates were buried by blowing sands before their governments prohibited pulling or harvesting the plants. Now, governments are as concerned with preserving a tourist attraction and they are with protecting farmland.
Beach, dunes, and grass in Spain. Photo: David Adam Kess. Source: Wikimedia
Beach grass is particularly well-adapted to harsh conditions: shifting sands and periodic coastal storms. It has to cope with a dry, windy environment, where moisture and nutrients are in short supply. As a result, beach grass doesn’t have a lot of competition and it’s the dominant species on many barrier islands and shoals on the Atlantic and Gulf Coasts. They allow a much richer ecosystem to flourish behind them in marshes, lagoons, and estuaries.
Some investments are like beach grass. They’re not the highest yielding or fastest growing instruments, but they provide stability during stormy times. They keep investors from getting blown around by the shifting winds of opinion, and they allow us to assemble a diverse assembly of investments – investments that may require more analysis or a more benign economic environment.
Sandy Neck Dunes on Cape Cod. Public Domain. Source: Wikimedia
Circumstances change in unpredictable ways, and there are situations where what you really need is something secure. Other times, you’re looking for a growing income stream or innovative, disruptive technology that can provide growth down the line. Economic conditions are like the weather: there are stormy times followed by periods of fair weather followed by variable conditions. We need to be prepared for all kinds of environments.
Investment portfolios are a lot like ecosystems. Their diversity makes them stronger.
Douglas R. Tengdin, CFA