What To Do When Investment Styles Clash

By Cindy Diccianni, Financial Advisor

You're a dual income couple, each earning a good salary. Both of you feel it is very important to invest a portion of those salaries. One small problem: one of you is strongly risk-averse, preferring a more conservative investment approach, while the other loves to take risks with investments.

A clash of investment and money management styles is common in marriages, especially among dual-career couples earning a sizeable salary. The same goes for couples that bring sizable portfolios to a second marriage. So, what do financial planners and advisors recommend that couples do when their investment styles clash? Let's discuss some options that can help.

Discuss your different investment styles

A great way to determine how different your investment styles can be is to discuss the value of money and how your family treated money during your upbringing. This can help both of you identify your strengths and weaknesses when it comes to money management, allowing you to use this knowledge positively.

Bring in an objective advisor

A financial planner or advisor can bring an impartial, knowledgeable perspective to the issue. A value-based planner/advisor can blend both of your investment styles, goals and financial aspirations and create a customized financial plan that will work for both of you.

Learn about investing

As you well know, it is difficult in life to make good, sound decisions without educating yourself first. Many of us make decisions before first getting all of the facts, only to wish that we had done more "homework". You can only be satisfied with your decisions when they are based on facts rather than emotions.

Many financial decisions are emotionally based. You know the car or the bigger home that you just have to have. Thinking through the decisions, what they mean to you and what they can do to you financially for many years to come will have a great impact on your actions today.

Clarify your investment goals

Understanding your investment goals can bring a mutual, or at least, closer agreement about how best to get there. For example, you both want to save for retirement; you can determine how much target money you will need for retirement and how much of your current income can be invested toward that target. Perhaps each of you might design your own asset allocation plan based on your risk tolerances. These investments can work together to better asset allocate your total portfolio.

Establish individual investment accounts

When investment styles clash this may be the only practical way to create an investment portfolio. There are different ways to set up individual portfolios. One approach is to have his, hers and their accounts. Each maintains their own retirement accounts and they pool their investment funds for goals such as a college fund or vacation home.

Even though the accounts are separate, sometimes one style balances out the other one over the long term. Of course, if the more aggressive investor erodes much of his or her retirement fund because of bad investments or a bear market, they may end up relying on the more conservative investor when it's time to retire. This could cause some bad feelings or bitterness.

Set up a "play money" account

Some financial advisors recommend that the determined risk taker invest perhaps five percent of the couple's total portfolio toward higher risk investments. This idea works so long as both of you are comfortable with the possibility that you could lose these assets. Five percent will not seriously harm the primary portfolio.

Investing for couples is often very stressful. But, as with many other situations in life, planning and keeping an open line of communication will help you achieve your goals.

Happy Investing!

Cindy Diccianni is a Registered Nurse, a Certified Senior Advisor (CSA), a Registered Investment Advisor and a Registered Representative with Leigh Baldwin & Company member NASD and SIPC. She is affiliated with Ortner, O'Brien & Ortner Advisory Group, Inc. and co-founder of Nurturing Your Success, Inc. Her passion is assisting clients in creating the financial freedom they dream of.

You may visit Cindy at www.nurturingyoursuccess.com or write to her at Cindy@nurturingyoursuccess.com. You may also call her directly
at (610) 251-9393.