Question: If the plan isn't broken, why fix it? We don't need the money for another 10 years, so with that horizon, what's wrong with staying fully in stocks?
Question: I’m 59 and invested in stocks — no bonds, gold or other assets. Within the year I’ll receive a $250,000 inheritance that I want to invest in stocks, but my wife is worried about current events and talking about lower-risk investments. I say if the plan isn’t broken, why fix it? We don’t need the money for another 10 years, so with that horizon, what’s wrong with staying fully in stocks?
Ric: The good news is that you are investing in a manner based on your experience and objectives. You also show that you have a willingness to take risk and have a high tolerance for volatility, and you believe it’s worthwhile because that approach will enable you to earn higher profits in the long term.
However, you seem to be dismissing your wife’s perspective.
The money you’re discussing is coming from an inheritance — and that means it belongs solely to you. If you keep the money in your name it will not legally be considered a marital asset; should you divorce, the money can remain yours (subject to divorce negotiations and whatnot).
But are you sure you want to treat the money this way? It’s your inheritance, but your wife has voiced her opinion about how to invest it — suggesting that she believes the money is “ours” and not strictly “yours.”
Therefore, I recommend that you collaborate with your wife to develop an investment strategy that satisfies both of you. Otherwise, lawyers might end up with much of the money, if you get my point.
I’m not telling you to explain to your wife why your investment strategy is the right one. You might silence her, but that’s not the same as convincing her. If you go with a portfolio that’s entirely invested in stocks, you’ll be forcing her to go on a roller coaster when she would rather ride a merry-go-round. Maybe you can handle the market volatility with your strong stomach, but she’ll get nauseous sitting beside you.
Also, I could argue that a 59-year old should not be invested 100% in stocks. You’re doing it because you think this is the way to generate the highest profits. But this assumption is not correct. If you were to spend an hour or two with one of my firm’s advisors, or if you read The Lies About Money, you’d see that, over time, a properly diversified portfolio can earn just as much as a stock portfolio, and with far lower risk. In other words, you can have the returns you want, and your wife can have the reduced risk that she wants. You both can win — and that’s what marriage is all about.
The two of you should discuss your entire financial picture, together, with an independent, objective, fee-based financial advisor. You’ll get the strategy that suits you both, and you’ll enhance your relationship at the same time.