To Do When Investment Styles Clash
By Cindy Diccianni, Financial Advisor
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.
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.
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
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.
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.
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.
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
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
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.
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.
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.
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.
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.