My wife is an investing wimp

Sunday, August 16, 2009 |

When I stumbled into the article My wife is an investing wimp on CNN Money, I can certainly relate to that. I am sure a lot of people can relate to this too, as the article mentioned. My wife is a lot more conservative in investing when compared to myself. As I mentioned earlier, I started my investing experience with investments in individual stocks. Those are very risky and event though I consider myself as not risk averse, I still understand the risk involve with investment in stocks. Thus the percentage of my money in equities is really small, may be around 15-20%. Not because I don't want to invest more, but that is the compromise to the level where my wife feel comfortable. But now I am investing mostly in index stocks and balance it nicely with bond funds, the percentage of our money in equities has increased. All our money not in emergency funds (we have about one year in emergency funds), we put it in our investments, which currently at around 80 to 85% in equities.

As mentioned in the article, communication in key. But beyond communication, here are several things that helps in my case (which may not necessary work for you, but may give you some ideas):
  • Having enough in emergency funds. In my case, I have to raise the emergency funds level enough to cover our expenses for a year or more. Having that amount of money in our savings account give her more confident that we can survive downturn when necessary.
  • In addition, I have to be more conservative in our retirement tax deductible account. The target allocations of equities vs bonds on our retirement accounts is based on 100-age. This is very conservative in a lot of people opinions, but the investment in our taxable account is 100% equities. This lead to another point. Bonds and REITs are not as tax efficient, thus by not having those investments in our taxable account, we managed our investment more efficiently from tax perspective.
  • I gave my wife more knowledge about each of our investments. She understand the risk better and are more comfortable with the investments. Be careful here, do not make it as if those investments are less riskier than it is. She knows a lot of our investments are risky, but she also knows that we have a lot of investments in TIPS, short term, intermediate term treasury bonds that should reduce our risks. Also, while I used love following individual stock price, do research on it and take risks with my money, including investments in options, I no longer invest in those. That fact increase her confidence in our investments.
  • Since I managed our money, I prepare a presentation slides, in this case using Google Docs, every 6 months with detail of our investments, our net worth, performance and plan for the following 6 months. It wasn't a long presentation at all. I can actually cover the whole topic in less than 10 minutes. I share the Google Docs presentation and spreadsheet to her so that she can look at it herself too.
But overall, the major thing that helps in our case is not investing in individual stocks. She felt as if we were gambling with our money when we invest in stocks. While we make some money, we lose a lot too. In addition, I was spending too much time following stock market and doing research. With our current investments strategy, I don't have to do more research daily or weekly. I just need to rebalance our portfolio and review our strategy every 6 months to a year.


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