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How should couples invest for their goals?

Posted on 21 Jun 2023
Author: Sayan Sircar

Tags: Portfolio Construction ; Portfolio Review

4 mins read
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This article shows how couples should invest together for their financial goals to manage their portfolio without any hassles.

How should couples invest for their goals?

📚 Topics covered:

Discuss goals and then map investors to goals
Mapping investments to goals
Cleaning up the current portfolio
Creating lazy portfolios

This article is the next part of our investing-for-couples series. Please read the first part here: Life stage investing: how should couples manage finances.

In this article, we will cover how couples can invest jointly for their financial goals like retirement, house purchase, children’s education and other purposes like vacations, entertainment etc. Here we have implicitly assumed that both spouses have an income but the concept can work even without income with the working spouse periodically gifting capital to the other. In the latter case, the gift is tax-free but capital gains may be clubbed with the income of the working spouse.

What are financial goals

We have covered why we need to set goals before investing in this post: Set a goal before looking for what to invest in

We will cover the process step by step.

Discuss goals and then map investors to goals

You must sit with your spouse and decide on your joint family goals. At this point, a few big goals will be the type of retirement targeted (traditional at 60 or earlier), whether to have children and their goals, and whether to purchase a house and the lifestyle you aspire to.

Naturally, these goals will impact the amount spent on lifestyle expenses and planned investments.

Once these goals are decided, you can choose to invest based on the size of the goal and the surplus (i.e. income - expenses) available. For example,

annual expenses like insurance premiums or festival gifting can be managed via a common sinking fund
short-term goals which are small in size, like a car purchase, can be saved by one spouse
slightly bigger goals like house down payment may be saved by both
one spouse can save recurring goals like taking foreign vacations every two years
more significant and longer-term goals like children’s college and retirement can be saved separately in both names

An example of mapping can be:

Goal name	Investor
Car	Spouse 1
House	Spouse 2
Vacations	Spouse 1
Child College	Spouse 1
Child College	Spouse 2
Retirement	Spouse 1
Retirement	Spouse 2

Mapping investments to goals

We will now add the investments to each goal and the individual investors. Using the example above, the table looks like this:

Goal name	AMC / Bank	Investor	Folio / Account	Type
Car	ABC Mutual fund	Spouse 1	1111	Money Market
House	PQR Mutual fund	Spouse 2	2222	Liquid
Vacations	EFG Bank	Spouse 1	3333	Recurring deposit
Child College	XYZ Mutual fund	Spouse 1	4444	Equity Index, Money Market
Child College	PQR Mutual fund	Spouse 2	5555	Equity Index, Gilt
Retirement	PQR Mutual fund	Spouse 1	6666	Gilt, Equity Index
Retirement	XYZ Mutual fund	Spouse 2	7777	Gilt, Equity Index

Having multiple funds from the same AMC for a single goal (e.g. Equity Index and Money Market funds from XYZ Mutual Fund for Child goal) allows for one-click rebalancing via switches. The above approach also allows investors to easily diversify across AMCs: Do you need multiple mutual funds to keep your money safe?.

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Cleaning up the current portfolio

To implement the above plan, cleaning up the existing portfolio is essential. We have discussed this plan in detail here: How to clean up your mutual fund portfolio?.

Creating lazy portfolios

The ultimate objective for portfolio tagged to each goal will be to be managed as a lazy portfolio. We have covered the concept in detail here: What are lazy portfolios and why you should implement them for your goals?.

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