Friday, October 9, 1998

Fooling Around with Your Spouse
by David H. Rothman ([email protected])

Who says you must leave home to join an investment club? You just might be in bed with the only other member you'll need, your spouse.

For the past year or so, Carly and I have followed Wall Street together, and we wouldn't want it any other way. Now we know the true test of a marriage. Will it survive if you act on your mate's ideas and you still fall behind the S&P? Actually my wife and I may have both underperformed the market because we put too much faith in mutual funds, especially those for small caps. But we've Fooled up with investments in gems like Safeway, and we're convinced that we'll triumph in the end. In fact, we have already won. We've long been Netaholics together, and now we're jointly Foolish, too -- one more common obsession.

Here are a few rules we have learned along the way, based on our experiences and others'.

Rule One: Don't Inflict the Market on an Unwilling Spouse

Is your spouse aggressively apathetic about the details of investing? Better not to drag him or her in. Merrily do a solo act. Of course you should at least try to share your enthusiasm -- perhaps with a gift of a book by Peter Lynch or the Brothers G. And whatever you do, make an argument for setting aside enough money for you to manage. Help your spouse understand the math of retirement.

Rule Two: Set Up Separate Brokerage Accounts

Even if Carly and I didn't have IRAs -- each limited to one person -- we'd still manage money separately. That way we needn't worry so much about the other's mistakes, which, of course, may be coups in the end given the ups and downs of the market over the long run. Oh, and, yes, you can still have an account managed by consensus. But at the very least you may want to set up separate accounts for play money.

Rule Three: If Possible, Use the Same Broker

One brokerage is enough. It's easier if you and your spouse can shift money back and forth for free with a simple phone call and can consolidate matters in other ways. Carly's share of my cable bill -- we get both TV and the Net that way -- goes directly to my Web account. Besides, by using the same brokerage, we can jointly educate ourselves about the quirks of a particular company.

If you trust your spouse enough, and the brave premise here is that you do, you might consider a joint-tenant arrangement or something similar. One spouse can run an account. But the other also owns it and can legally be ready to take over in case of death or disability; check with a lawyer about the implications. Donald Trump and feisty or prudent divorce attorneys may hate such an approach. But this Fribble is unabashedly for Fools who believe in buy-and-hold marriages.

Rule Four: Don't be Afraid to Invest in the Same Stocks

Carly and I both invest in what we know; hence, the money we've put into Safeway. Oh, yes, some diversification can help. But why resist the inevitable if we love the looks of each other and the SWY chart? Besides, intelligent concentration in our favorite sectors is better than mindless diversification. No need to marry stocks themselves, of course, but try to avoid diversification in the spousal sector.

Rule Four: Stay Plugged in!

While you may not want to mess around with the old-fashioned kind of investment club, you'll definitely want to benefit electronically from the wisdom of other investors through the Fool site and other goodies. Be especially attentive to the posts of shorts -- to balance out the enthusiasm that you and your spouse may feel about certain companies. Keep open minds, both of you. Don't let love be blind to each other's mistakes.

Rule Five: Don't Divorce over Different Investing Styles

Carly and I have both gone through our different periods together -- our mutual fund period, our small-cap period, our large-cap period (in which we may find ourselves forever since these companies better suit our buy-and-hold approach). But conflicting styles aren't necessarily bad. If small caps take off, Carly and I may suffer at least in the short run because we're so highly concentrated in the likes of General Electric and Safeway.

Rule Six: Swear at Mr./Ms. Market, Not Each Other

Don't get emotional about your luck vs. your spouse's, and never denigrate your partner aloud or in your mind because his or her stocks went south. We know how fickle the market can be; don't let love be the same.

[Hey Fools, why not pen a Fribble, yourself? We welcome submissions from readers. Just click here and read the "What's a Fribble?" item, pen a short masterpiece, and send it off to TMF [email protected].]

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