6 Lessons from Baking That Apply to Investing

November 19, 2020 Carrie Schwab-Pomerantz
Investing, like baking, takes patience and planning.

Dear Readers,

As we've all hunkered down due to the pandemic, have you noticed that more and more of us are getting into baking? Even though we may not easily get together to share a meal with family and friends, we can still share recipes as a way to connect.

With that in mind, I thought I'd share a recipe that has special meaning for me: my family's pumpkin chiffon pie, which we make every year during the holidays.

And as I was rereading the recipe, I got to thinking about how baking and investing are alike. Here are six lessons I've learned from making this pie that could just as easily apply to your portfolio.

1. A good recipe removes the mystery

Isn't making chiffon pie complicated? Not really—so long as you follow the directions (see below). A good basic recipe will tell you the essential ingredients, how to mix them together, and the time involved. In a way, an investment plan is like a recipe for building your portfolio. Your basic ingredients are stocks, bonds, and cash. The measurement for each ingredient is kind of like asset allocation. And the baking time is like your time horizon. Once you have a handle on those key things, you just need to take it step by step.

2. Quality ingredients are essential

As with baking, you'll have better success with investing if you start with good ingredients. Whether you prefer exchange-traded funds (ETFs), mutual funds, or individual stocks, don't skimp on quality. That means doing your research on companies, fees, and ratings before you buy. Also, know that you don't always need a lot of money to get the quality ingredients you want. With the introduction of new services like fractional shares, for example, you can even buy a "slice" of a very expensive stock if you want to add that to your mix.

3. The right tools make it easier

You could try to whip the chiffon in this recipe by hand with a whisk, but an electric mixer is a lot easier and typically yields better results. The same is true of investing. You can do it all yourself—and plenty of people prefer to do so—or you can take advantage of robust digital tools, financial planners, and/or robo-advisors to help make the process simpler and more efficient.

4. There's room for a personal touch

Once you've mastered the basics, you can get creative. That's because tastes—and circumstances—change. Don't like walnuts? Leave them out. Too sweet? Cut back on the sugar.

You can take a similar approach with your portfolio. Too conservative? Maybe you'll want to add some technology stocks in your allocation. Too risky? Leaven your stocks with a bit more bonds. Investing, like baking, isn't an exact science. The important thing is to make any changes based on knowledge and experience, not on a whim. Whether you're talking about pie or your portfolio, making change for change's sake can leave you with a bad taste in your mouth.

5. Control the heat

Let's say you're in a hurry and want to turn up the heat under the pumpkin custard to help move things along. Is it worth the risk? You need to ask yourself the same thing when it comes to investing. Sure, taking on more risk might potentially increase your returns—but at what cost? Whenever you turn up the heat, whether on the stove or in your portfolio, you have to really stay on top of it or something might get burned.

6. Take your time

This recipe has been in my family for years. As far as I can tell, it started with my grandmother (though it may have come from my great-grandmother) and got passed down through the generations. My mom made it, I make it, and now my son makes it, too.

And as we've each taken our turn, this humble recipe has provided an opportunity to connect, tell stories, and share lessons. Whether you're baking or investing, patience, planning, and a little practice are the best ways to ensure you don't wind up with something half-baked. It takes time to master—but the results are well worth the wait.

Pie filling

1. Mix the following ingredients in the top of a double boiler:

  • 1 envelope gelatin
  • ½ cup sugar
  • ½ tsp. salt
  • ½ tsp. cinnamon
  • ½ tsp. nutmeg
  • ½ tsp. ginger

Fill the bottom pan of the boiler with an inch or two of water and set to simmer.

2. In a separate bowl, beat lightly together:

  • 3 egg yolks
  • ¾ cup milk

3. Add wet ingredients to dry ingredients in the top of double boiler and stir. Then add:

  • 1 ¼ cup canned pumpkin
  • ¼ cup ground walnuts

4. Put top of double boiler directly over medium heat until mixture is warm, then place over bottom of double boiler and cook, stirring constantly, until gelatin is dissolved and mixture is thickened (about 10 minutes). Pour mixture into shallow dish and chill until firm.

5. In a separate bowl, beat 3 egg whites until very stiff, then beat in:

  • ½ cup sugar (gradually)
  • 2 tsp. vanilla (1 tsp. at a time)

6. Fold egg white mixture into chilled pumpkin custard, then pour into 9" deep-dish graham cracker crust (recipe below). Refrigerate.

7. Take pie out of refrigerator an hour before serving so it will slice easily. Best served with homemade whipped cream.

Graham cracker crust

1. Mix together:

  • 11 graham cracker sheets, coarsely crushed
  • ½ cup powdered sugar

2. Melt ½ cup butter and stir into graham cracker mixture.

3. Pour three-fourths of mixture into bottom of 9" deep-dish pie plate and pat down with fingers, covering entire bottom of dish.

4. Use remaining mixture to line sides and rim of dish, using a warm, dry teaspoon to pat and make firm.

Carrie's tips

  • This recipe makes one pie.
  • Don't use a store-bought crust—homemade is so much better. For best results, make a day in advance and avoid crushing the crackers too finely.
  • Be sure to chill the pumpkin custard before mixing in the egg whites.
  • Don't be too critical when your kids make the pie!

Pie filling

1. Mix the following ingredients in the top of a double boiler:

  • 1 envelope gelatin
  • ½ cup sugar
  • ½ tsp. salt
  • ½ tsp. cinnamon
  • ½ tsp. nutmeg
  • ½ tsp. ginger

Fill the bottom pan of the boiler with an inch or two of water and set to simmer.

2. In a separate bowl, beat lightly together:

  • 3 egg yolks
  • ¾ cup milk

3. Add wet ingredients to dry ingredients in the top of double boiler and stir. Then add:

  • 1 ¼ cup canned pumpkin
  • ¼ cup ground walnuts

4. Put top of double boiler directly over medium heat until mixture is warm, then place over bottom of double boiler and cook, stirring constantly, until gelatin is dissolved and mixture is thickened (about 10 minutes). Pour mixture into shallow dish and chill until firm.

5. In a separate bowl, beat 3 egg whites until very stiff, then beat in:

  • ½ cup sugar (gradually)
  • 2 tsp. vanilla (1 tsp. at a time)

6. Fold egg white mixture into chilled pumpkin custard, then pour into 9" deep-dish graham cracker crust (recipe below). Refrigerate.

7. Take pie out of refrigerator an hour before serving so it will slice easily. Best served with homemade whipped cream.

Graham cracker crust

1. Mix together:

  • 11 graham cracker sheets, coarsely crushed
  • ½ cup powdered sugar

2. Melt ½ cup butter and stir into graham cracker mixture.

3. Pour three-fourths of mixture into bottom of 9" deep-dish pie plate and pat down with fingers, covering entire bottom of dish.

4. Use remaining mixture to line sides and rim of dish, using a warm, dry teaspoon to pat and make firm.

Carrie's tips

  • This recipe makes one pie.
  • Don't use a store-bought crust—homemade is so much better. For best results, make a day in advance and avoid crushing the crackers too finely.
  • Be sure to chill the pumpkin custard before mixing in the egg whites.
  • Don't be too critical when your kids make the pie!

We can help you build a diverse portfolio.

Closing Market Update

Fed leaders concluded a two-day policy meeting by leaving interest rates unchanged, as expected, but signaled another rate increase later this year could be necessary.

Quarterly Market Outlook: A Delicate Balance

The Federal Reserve weighs the data while investors wonder: Is the rate-hike cycle over?

Opening Market Update

The market expects the Fed to make no moves on interest rates today, but investors await the central bank's economic projections for the rest of the year and 2024. Crude oil prices and treasury yields eased this morning, giving stocks a premarket tailwind.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed.

Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.

Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market.

Investing involves risk, including loss of principal.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

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