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Published: Tuesday, Mar. 24, 2009 / Updated: Tuesday, Mar. 24, 2009 03:00 PM

Investor's Corner - March 25, 2009

Good lessons from the 'guardians of the grape'

As an investor, you can get plenty of advice from financial experts on the evening news or cable financial shows. But you may actually be able to learn some deeper truths about investing by observing other professionals -- such as winemakers.

At first glance, you might not see what these "guardians of the grape" can teach you about building an investment portfolio. After all, they're shaping Sangiovese while you're seeking stocks, they're bottling Burgundy while you're buying bonds, and they're mastering Malbec while you're monitoring mutual funds.

Where's the connection?

Start by considering the life cycle of wine and the concept of "vintage." For example, a particular wine is labeled a 2005 vintage if it is made from grapes that were predominantly grown and harvested in 2005. Yet given the requirements of wine production, this 2005 vintage may not actually hit the markets until 2008 -- and some aficionados may think the wine won't taste its best until 2018.

If you translated this type of scenario to the financial world, you could say that the 2008 investment "vintage" was not promising, given that the value of almost all investments -- even the quality ones -- fell last year.

But if you were to hold these quality investments for the long term -- as you should, because investing is a long-term activity -- you might find that the 2008 vintage investments may eventually become productive vehicles that can help you achieve your financial goals.

So, what lessons can you learn from winemakers? Here are a few suggestions:

Be patient. Winemakers put a lot of time, effort and money into planting today's grapes -- for which they will not see one penny of profit for many years. Yet they have the discipline to wait patiently until the products of their labors come to fruition. Are all their wines successful? No -- and all your investments may not be, either. But given enough time, quality investments can usually help you work toward your financial goals.

Have faith in your strategy. Wine drinkers' tastes can change from year to year. Yet winemakers don't rip out their vineyards and replant them with today's "hot" varietals. Instead, they cultivate the grapes they've planted, make the best wine they can and maintain their belief that their products will find a market. As an investor, you can't allow yourself to be swayed by today's hot tips and trends. Instead, build a portfolio of quality investments that can stand the test of time.

Adapt your goals to your situation. One of the most famous winemaking regions in the world, Napa Valley, contains a number of microclimates that vary by temperature, rainfall and soil. Napa Valley winemakers know which grapes will do best in which microclimate, and they concentrate their efforts accordingly. And you, as an individual investor, should make your investment decisions based on your own "microclimate" -- your risk tolerance, family situation, time horizon and other factors. In other words, you should choose those investments that are best suited for you and that have the best chance to help you meet your goals.

Investing, like winemaking, is filled with challenges. But by observing how winemakers work, you may learn some things that can eventually help you raise a glass to your own success.