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Working on our disagreements about investing style

February 26th, 2008 at 05:35 pm

Thought this post of mine on the investing forum would be interesting to keep around in my blog. Sorry if you've been following the thread and this is a repeat.

I'm a mutual fund gal, buy and hold (to a fault), very long-term (>10 years) focused. (I say "to a fault" because when I first started working, I bought about $6k of AT&T stock through an ESPP, and held on to it while it divested into Lucent, Comcast, and a few other stocks. At one time my Lucent stock was worth over $40k, and I held it all the way up and all the way down and finally sold at a loss a few years later. If that's not buy and hold to a fault, I don't know what is! I concluded that until I'm willing to pay more attention, I should not own individual stocks!)

My DH feels I've been holding him back from investing in individual stocks. At times he has mentioned he wants to put $10k or $50k into a single stock, and by the time I've gotten over the shock of the dollar amount he says the buying opportunity has passed. The argument we have is entirely predictable -- he says $10k, I ask how about $2k, I ask if he's timing the market, he tells me how he lost money by holding a certain stock too long because I kept talking about buy and hold. He doesn't end up buying the stock (even though I would've been ok with investing a smaller amount) and we're both frustrated.

The answer, I think, is to have an account that is dedicated to stock trading, and to agree that he can invest it any way he wants. Would $20k be a reasonable starting amount for such an account? Our overall picture is $395k in retirement accounts, $375 in taxable mutual funds, $9k in ESPP stock, $17k in money market, and $20k in checking/savings. We're 37 years old. I estimate the emergency fund needs to be in the range of $13k to $26k, and we contribute 12% to 401k. We've agreed in principal to each manage our own retirement funds, although we're trying to consult each other before making any major moves.

4 Responses to “Working on our disagreements about investing style”

  1. Broken Arrow Says:

    I know that the technical factors are discussed in the forums, so I'll skip that part. On a more personal (blog) level, I hope that you'll give him a chance to try it out. It looks like your collective nest egg is in good shape; well enough for him to give it shot and maybe get it out of his system... or he succeeds and increase your collective prosperity.

  2. merch Says:

    I agree with BA. If you look at your net worth, $20k is not a lot.

    I would just ask that we keeps you informaed of the investments or you have access to the account, just to see what's in there. You should also talk about the type of investments. Are short sales allowed? Writing naked options? Futures that mark to market everyday? Will he be needing a margin account?

    Basically, my advice is $20k isn't a lot of money with your wealth. But you don't want these investments to threaten your wealth.

    Good luck.

  3. zetta Says:

    No, he's not interested in short sales, naked options, futures, or margins -- now that would be really scary! His interest is in more vanilla stuff like high tech stocks. $20k is just the taxable account, which is joint -- he may also choose to do some stock trading within his IRA and ROTH, since there is currently a lot of cash there.

  4. scfr Says:

    Since he hasn't gone ahead and done it anyway, it sounds like he very much respects you, and that is great! So, given your overall financial picture, and since it's something he really wants to do, I'd say let him do it! But, lay some ground rules. Specifically, absolutely no trading on margin! In addition, perhaps you could set some parameters, similar to the type you might make before going to a casino ... When the $20K is gone, it's gone ... And if the values reach $80K, he cashes in his chips and buys you a nice dinner!

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