How Can Couples Invest Together In Mutual Funds?

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During the lockdown, most of us were staying at our home with our family. Although many of us were working from home, we had quality time with our family. Many of us were spending time with their spouse, and not only this but they were also helping them in their household chores. Here the question, does this partnership should be followed for family fund investments as well?

That means how do you take your portfolio, separate or part of the whole? Taking your portfolio separate from your partner’s means that both might own a similar portfolio that truly doesn’t make any sense if you consider this financially.

Let’s see how.

May Your Portfolio Overlap Your Spouse Portfolio

Suppose a husband have three Equity funds in their portfolio, say scheme A, B, and C, while his wife also has three Equity mutual funds in her portfolio, say scheme D, E, and F. No doubt diversification is there, but more in quantity and less in quality. Such diversification doesn’t help much after a point.

For an instance suppose, both of them together invest in six large-cap funds, obviously, it will lead to owning most of the stocks of an equity large-cap index, this is quantity diversification and not quality diversification.

If you and your spouse take both of your portfolios as a part of the whole, then maximum two-three large-cap funds are sufficient in your portfolio. Which fund you should make as the part of your portfolio and how much you must invest in it, these all strategies are planned well, when based on your goals.

Sharing Vision Is Must

Two people have different thoughts about different things. Likewise, your spouse might have different planning about different big and financial goals of your life, like that of retirement or a child’s education. Suppose your partner wants to spend a lavish retirement, whereas your choice is a normal or frugal one. These make a difference in the corpus required for both of your retirement goals.

Thus, it is important for a couple that they must share their vision regarding different financial goals of their life, this way they can reach a mutual consensus, and plan their investments in an efficient way to fulfill their goals.

Different Approaches

Once you share your vision with your spouse, now you have two ways to achieve your goals.

The first strategy says that both husband and wife could chase separate goals. For example, the wife could invest for a child’s education from her income, while the husband invests for retirement. Through this strategy, they are investing for different goals, thus even if their portfolio matches, it isn’t a big deal.

In the second strategy, the couple combines their finances and invests jointly towards a goal. For example, if both are saving for retirement, they would own three good-performing equity funds among themselves. If the husband owns funds ‘A’ and ‘B’, the wife will invest in ‘C’ to complement the former’s portfolio. If there is an overlap, they will prune the portfolio in unison.

You Must Focus

Quality diversification or goal-based diversification is necessary but at the time you must understand that its much is easier to handle and manage a small portfolio. When a couple owns 25 funds, they might not bother about the underperformance of a single fund –as it constitutes only 4% of the overall portfolio. However, when they own just three funds, any underperformance hits them hard financially. So, they take the necessary action.

Not only this having a small and goal-based portfolio will help you keep track of its performance and weed out non-performers from time to time.

So basically, if couples are investing for different goals, then having the same portfolio is not an issue, but in case if they are investing for the same goal, then it is a must that their fund complements each other. Through this strategy, couples can execute their investment perfectly and can together accomplish all their financial goals efficiently.

Also Read: Top Reasons to Invest in Mutual Fund Tax Saving Scheme

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