Sometimes the solution is for each spouse to keep his or her own portfolio.
One spouse wants a sports car, the other a minivan. One wants to spend their vacation in a five-star resort, while the other wants to “really get to know the land” and go camping.
For some couples, the same kind of dilemma arises when investing. Say that one spouse, by nature, is a conservative investor, suffering restless nights when investments drop, while the other spouse is a more aggressive investor who’s perfectly comfortable sitting through the market ups and downs, confident that the trend is upward over time.
Does this sound familiar to you? If you and your spouse tolerate risk at different levels, here are three approaches that may help.
Keep your eye on the prize
In addition to risk tolerance, investment objective and time horizon are the key factors that drive the structure of your portfolio. Sometimes, the objective and corresponding time horizon align more with one spouse’s risk tolerance. If the other spouse agrees, then you have a fortunate case of practicality trumping personal differences.
For example, say a couple starting out is saving for a down payment on a house. This goal has a limited time horizon and their potential home is at stake, so the spouse who normally wishes to invest aggressively may be content to stay away from higher-risk investments. Or, take a couple building their retirement nest egg. A look at investment projections may persuade the conservative investor to include higher-risk investments to achieve the potential returns they need.
Meet in the middle
With this strategy, the couple meets halfway, creating a diversified portfolio that adjusts the risk level by about the same degree for each spouse. It means finding a weighting between equities and fixed income that brings a compromise, eliminating or minimizing the most aggressive and conservative holdings.
It’s a strategy that may benefit both spouses. The aggressive investor won’t take on any undue risk, and the conservative investor could take better advantage of market opportunities.
Agree to disagree
However, sometimes compromise doesn’t work for a couple. Sometimes the solution is for each spouse to keep his or her own portfolio. At first glance, this might look like two people agreeing to disagree, not a strategy involving partnership, but the net effect is actually a well-rounded approach.
For example, say the couple has independent, non-registered accounts dedicated to retirement savings. Both spouses stay true to their investment philosophies and make their own investment decisions. Combined, the two portfolios nicely balance long-term growth potential and capital preservation.
If you and your spouse have conflicting ideas about investing, it may be beneficial to talk to an advisor who can develop a customized solution for you.