I have a frequent problem I run into with people when speaking about investing. I’ll meet with a couple that has two IRA accounts and the husband may tell me “Well my wife is conservative so we want her portfolio in bonds and money markets, but I’m very aggressive so I want growth stocks”. On the surface that might seem like a reasonable statement. But think about it. This is a married couple planning for their retirement. It’s not her money or his money, it’s their money.
This spills over into looking at statements. A client of mine called up once and said “Well my husband’s portfolio isn’t doing as well as mine, is there something we could change?”. If you think about it, it’s a request that doesn’t make much sense.
I’ve come up with an analogy. Think of it like a pair of jeans. You have some money in your front right pocket (IRA) your back right pocket (cash account) back left pocket (Roth IRA) etc. These are not distinct portfolios, it’s all your money. You may want to mix the amount of growth versus income, short versus long term. That’s fine. Which pocket it’s in isn’t important. Yes longer term stuff will probably go in the IRAs, but it’s still not a distinct portfolio. People don’t have multiple portfolios, they have one, spread around in different pockets.
Here is what everyone should do when they get their statements from various banks and brokers. When you want to see how much money you have, add them all up. When you want to see how much money you’ve made this year, add up the balance as of January 1st versus the total balance now. It’s all one portfolio, and all your money is just in different pockets of your one pair of jeans.