How To Invest As a Couple
Disclaimer: the investing information provided on this page is for educational purposes only.
If you’d like to know how to invest as a couple, then BAM! You are in the right place.
My name is Ezra, and I’m an investor and a current finance and accounting major.
Recently, a friend asked how he could invest with his wife, and I came up with these steps.
Taking up investing as a couple, especially when both or one of you is new to it, can be challenging. Here is an easy way to get started.
Step 1: Determine your investment goals
Financial goals in investing are super important. They help you know what it is that you want and how you can achieve what it is you both want as you invest as a couple.
These goals will set the pace for both of you and help you decide what to invest in.
When coming up with your goals, they need to be given time frames and broken down into chunks, from short to long term.
For example;
You might both want $40,000 for a down payment for a new house, a new car, a $10,000 vacation to the Maldives, and $100,000 for 7-year-old Stacy’s college fund.
You’d divide all that like so:
A vacation to the Maldives and a new car are short-term goals. The down payment for a new house is a mid-term goal, and Stacy’s college fund is long-term.
What those goals do is prepare you to know what needs the most attention.
Step 2: Find out what your investment tolerance
Investing your money together, you’ll obviously be hoping for a sweet, sweet return. But to get a return, you need to understand that you are at risk of losing some or all of your money.
One of you might be willing to take riskier decisions to get the high returns, whereas the other would prefer something conservative and safe.
That’s why you’ll need to figure out, as a couple, what your general risk tolerance is.
Risk tolerance is an investor’s ability to mentally endure to lose part or all of their initial investment in exchange for greater returns.
To achieve your investment goals, you’ll need to invest in different asset classes, such as stocks, bonds, and so on. Some of these investments have high returns, but the risk associated with them is hard for some people to handle.
As a couple, you’ll need to know how much you can bear losing in case a loss were to happen.
Step 3: Research on the different types of investments
You’ll need to research the different types of investments that you can undertake together that’ll help you accomplish those investment goals.
With an emphasis put on asset allocation, time horizon (this is the period you’ll hold an investment until you need your money back) and liquidity (how easy it is to turn your investment into cash) of investments plays a big part here.
For example:
To get $100,000 for 7-year-old Stacy’s college fund, you’ll be investing for more than 10 years and would be conservative with your approach. Less liquid assets would suffice.
Once you are done with research on all the different terms and options that fit your goals, you’ll need to build an investment strategy.
Step 4: Build your investment strategy
An investment strategy is what will guide your investment decisions based on your financial goals and need for money.
Great questions to ask when doing this are — how much money are we realistically willing to consistently contribute? How about taxes, how do we reduce those? What assets are we buying? How are we going to diversify our portfolio?
If this is all too overwhelming, you may want to seek a financial planner once-off to help prepare an investment strategy for you.
After you’ve got a solid investment strategy, you’ll need to get an investment account.
Step 5: Set up a joint investment account
Now’s the time to get grease on your hands, set up an account that you’ll both put money in and watch grow.
There are different accounts you can open, but the best type of investment account would be a taxable account, like a brokerage account. You can’t have joint retirement accounts (IRA and 401(k)) while investing as a couple.
With a brokerage account, you can withdraw your money at any time with no worry of a tax or penalty. You can use your brokerage account to invest in stocks, mutual funds and bonds.
NB: Do more research on the pros and cons of this account type to see if it’s a right fit for you two.
Summary
There you have it five generous steps on how to invest as a couple.
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