Couples Therapy

There’s a simple way for couples to improve how their money is managed: listening.

It’s been documented that men and women think differently about money. Whether the reason is genetic or cultural, men and women have differing underlying biases. By using your partner’s biases to balance your own, the result should be an investment portfolio that both of you are more comfortable with.

What are these tendencies? Men tend to be overconfident, trading more on too little information. They tend to trust their own hunches rather than fundamental data. But women tend to be too risk averse, investing less than they should in equities and sticking with short-term bonds. But each can learn from the other. Equities are necessary for growth, bonds for stability, and cash for liquidity. The key is finding the right mix.

Using your partner’s strength to balance your own weakness can help you both put together a plan consistent with your mutual goals and limitations. The key is maintain your approach over time. When the chips are down, it’s tempting to sell out and bury your money in a jar in the back yard. Don’t. But things are coming up roses, people are enticed to double-down and let it ride. That’s a mistake too.

By listening to your partner you can hold some of your own tendencies in check and develop a plan that you both can stick with. That can help your money to become a mutual project, rather than a source of mutual problems.

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

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By | 2014-09-11T14:09:04+00:00 February 8th, 2011|Global Market Update|0 Comments

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