Everyone says that good communication is crucial to any relationship, and discussing finances is a big part of that. It’s easy to fall into the trap of just winging it—my wife and I have been guilty of this too.
However, whether one partner takes the lead or you share the responsibilities, having a clear and structured approach to your investment strategy can make all the difference. It might be the key to hitting your goals or falling short.
In this week's The Boost, we’ll cover some of the key areas you and your partner should focus on to align your investment goals and strategies.
What you need to know
When it comes to building a strong investment portfolio, both partners should have a view on:
1. Defining investment goals
2. Setting risk tolerance
3. Monitoring portfolio diversification
4. Measuring performance
5. Tax saving strategies
6. Retirement savings
7. Family needs and goals
What are your goals?
Investing is a means to an end, so you need to be clear on what you’re saving for. Are you working toward short-term goals, like a vacation or a down payment on a home? Or are you thinking long-term, like funding retirement or your children’s education? Maybe it is all of the above.
By having a clear picture of what you’re aiming for, you can set up an investment strategy that aligns with those goals, including specific accounts for specific purposes. For example, if you need to fund a down payment for a home purchase in the next year, you’ll want to have that money in lower-risk investments that you can liquidate without withdrawal penalties, while long-term goals like retiring in 30 years might allow for more risk-taking.
What's your risk tolerance?
Your risk tolerance is closely tied to your goals. One partner might be okay with taking bigger risks for higher rewards, while the other prefers a more stable, conservative approach. It’s important to find a balance that suits both of you to avoid any surprises down the line.
One way to think about this is to ask if you’re comfortable with standard market returns, or if you’re looking for more aggressive (and riskier) returns. For instance, the S&P 500—a common market benchmark—has historically returned between 7% and 11% per year. But if you’re looking for higher returns (with more volatility), you could look at something like the Nasdaq 100, which returned 274% over the last 10 years compared to the S&P 500’s 175%.
Source: https://www.longtermtrends.net/nasdaq-vs-sp500/
Are you diversified?
Closely related to your risk tolerance, it's important to regularly revisit the composition of your portfolio. A year ago, tech may have been 25% of your portfolio. With the sharp increase in the Nasdaq over the past year, perhaps the current allocation is larger than you'd like.
Your strategy could differ across accounts as well. Perhaps you prefer to take more risk in your retirement accounts given a long horizon, while you take a lower risk approach with your taxable brokerage accounts that will be funding an upcoming home downpayment. You'll want to set diversification in each of those accordingly.
How are you tracking towards your goals?
Compare your portfolio’s performance against benchmarks that reflect your asset allocation. Are your investments growing in line with your goals and your risk? If not, consider making adjustments, such as rebalancing your portfolio. Even if one partner is the primary investment manager, both should participate in key decisions about reallocating funds.
What is your unique tax situation?
Taxes can eat into your investment returns if you’re not careful, and they get more complicated when you’re managing finances as a couple—especially if you file jointly. Make sure you are aligned with your partner on opportunities to reduce taxes or maximize tax saving opportunities. These could involve upfront contributions (and thus cash flow reduction) for long-term savings.
• Tax-advantaged accounts offer tax benefits that can help your investments grow faster.
• Tax-loss harvesting to offset capital gains by selling investments at a loss to reduce your tax bill.
• Avoiding short-term capital gains by holding investments for at least a year to qualify for lower long-term capital gains tax rates.
Both partners should have a basic understanding of how taxes fit into your investment plan, as this can make a big difference in the long run.
What are your retirement plans?
Retirement planning isn’t just about how much you can save—it’s about how you want to live. Have you thought about what kind of lifestyle you want in retirement? Will you want to travel, spend more time on hobbies, or live near your family?
The clearer you are about your retirement goals, the better you can plan for how much you’ll need. Use retirement calculators to get an idea of what savings you’ll require, and regularly review your retirement accounts to ensure you’re on track. You might need to adjust your contributions as your income grows or your goals change over time.
What do you need for your kids?
If you have kids, there are plenty of investment goals you may want to consider for them too. Are you planning to fund their college education, or maybe help them with their first home purchase someday?
Setting up specific accounts, like a 529 plan for education savings, can help you stay organized and take advantage of tax benefits while you’re at it. Even small, consistent contributions can add up significantly over time.
By having regular, open conversations about these key areas, you and your partner can work together to build a solid investment plan that meets both of your needs. Good communication and a shared strategy are the foundation of a successful financial future.
How can Mezzi help?
Mezzi is built to help families build wealth together.
Start by inviting your partner as a collaborator.
Both you and your partner can share the same view of all your investment and bank accounts.
Compare and benchmark performance across accounts
Benchmark and track performance across different time horizons for each of them.
Assess retirement savings
Use Mezzi to ensure you're both on the same page with shared views of all your accounts, organized by taxable and tax-advantaged.
Estimate your taxes and track loss carry forwards
Personalize Mezzi with your current or future tax rate. Track loss carry forwards and use them to reduce your tax burden.
Save on taxes across accounts
Losses in your taxable account and gains in your spouse's account? Use Mezzi to track opportunities to offset gains and losses and reduce your tax exposure.
Track diversification
Using Mezzi's Allocation insight, track your exposure to sectors like tech, energy, financials, and more. See each account's Concentration to assess if you own too much of a given stock or ETF, including
