t For Valentine's Day this year, my husband surprised me with a beehive. Or rather, the promise of a beehive - "The bees aren't ready yet," he said. "We'll go pick them up in April. Isn't that cool?"
They always tell you never to give somebody a puppy as a present, because a pet is an enormous responsibility. And my husband had just given me ten thousand small pets. With stingers on their butts. And as I started furiously reading "Beekeeping for Dummies," I realized that I was in way over my head. I joined the Santa Cruz Beekeeper's Guild. I got a beekeeping mentor, who graciously allowed me to tag along during three hive inspections. There I learned how to identify bee larva, burned myself with the smoker, and ended up with my first bee sting. So far, so good.
As I read more about bees, I realized that they have some good lessons that carry over to the world of finance.
1. Build Up Your Emergency Fund
Bees don't go outside during the winter - it's too cold. Instead, they stay inside in a tight cluster, warming up the queen. But they need lots of honey to keep them going, so they build up honeycomb that they can access during these hard times. Much like building up an emergency fund, storing honey is a way for bees to build in a buffer that they can tap into when things get tough. For bees, their "emergencies" are a bit more predictable - after all, winter happens once a year at about the same time, unlike your car transmission exploding - but just like us, they know it's important to have resources to fall back on.
The number one rule for investing is first to build up a few months of expenses in your emergency fund. Without that fallback, it won't matter how good your investments are - the volatility will kill you. You always want to have cash to rely on so that you can weather the ups and downs of the market.
Fun bee fact: In the spring, after a long winter stuck in the hive, bees will take what is known as a "cleansing flight." Bees don't poop in their hives, so in winter they just have to hold it... and hold it... and hold it... Then on the first warm day, they all fly out and poop everything out. Their poop is yellow because of the pollen. This is my daughter's favorite bee fact and has nothing to do with finance whatsoever.
2. Diversify Your Investments
Bees have two sources of nutrition: pollen and nectar. Pollen is the "growth" part of the bees' portfolio - besides munching it, they use it to feed their babies when the hive is growing bigger through the spring and summer. Nectar is the "stable" part of the portfolio - bees need it to survive, and they store it away in the form of honey to keep during the hard times of winter. Just like people investing in bonds as they get closer to retirement, bees getting closer to winter tend to forage more for nectar than for pollen. They know they don't need to grow quickly right before their "income" gets cut off - they need the stable stores of honey that nectar gives. The investing lesson to take away from the bees? Don't shove all your investments into Tesla right before you retire.
But that's not the only kind of diversification bees do. Much like the diversification we have with index funds, where you can have many different stocks in a single fund, bees gather a dazzling array of pollen and nectar, storing them in separate cells (see the different colors below). Each different type of flower gives bees a different type of nutrition that they need to survive, and bees that eat a diverse mixture of pollens are healthier and live longer than bees who only eat one kind of pollen. For both bees and humans, diversification is healthy.
3. Rebalance Regularly
Sometimes, beekeepers will feed their bees to strengthen their hives and encourage growth. The ratio of nectar and pollen inside of a hive will stabilize according to the bees' overall needs. Bees naturally "rebalance their portfolios" - when they are being fed sugar syrup, they will stop bringing in nectar and forage more for pollen. If they are given pollen patties, they will stop bringing in so much pollen and focus their efforts on gathering nectar.
Similarly, when there is too much moisture in a hive, bees will take it upon themselves to stand at the hive entrance, fanning their wings to drive out the humid air. If the hive is too hot, they will go gather water and bring it back to cool down the hive inside. Beehives have a very strict standard for moisture and heat, and if anything is out of balance, they quickly rearrange the work inside the hive to get it back to where it needs to be.
While the bees may not have a written investment policy statement like you do, it's clear they know what the balance point is for their hive - and they keep it right on target with regular rebalancing.
Fun bee fact: When bees have too much nectar and no place to store it, they eat the nectar or honey and convert it into beeswax, which they secrete from glands and shape into honeycomb. It takes a bee seven pounds of honey to create one pound of wax - that's why beeswax costs so darn much!
To sum up, bees are ridiculously complex creatures, with an intelligence that rivals that of any amateur investor. Sure, they are workaholics who hoard their wealth and uphold a monarchical caste system. But they are great dancers, and adorably fuzzy. And in the realm of investing, at least, they have some sweet, sweet lessons to teach us.