One way to pursue shared life goals with a partner is to invest together. You can do so by finding a brokerage firm that allows 2 or more people to open a joint investing account.
This venture is not something to enter into lightly since you’re combining finances and facing potential gains and losses as one unit. To know if you’re ready, look out for these signs:
1. You have established trust
Any successful partnership is built on trust. You and your investing partner should be confident in each other’s integrity, judgment, and commitment to your shared goals.
Having clear, open, and constant communication is a must so you’re prepared to face the ups and downs of investing together.
2. You know and understand each other's financial standing
It’s important to be in good financial health before investing, whether alone or with a partner. This can protect you from huge losses in case your investments perform poorly or when an emergency costs you a lot of money.
That’s why you need to have an honest discussion about finances to find out whether you and your partner are in a good place to invest together.
It’s natural to want to keep details of your income and debt private. However, it’s only when both of you have a clear view of each other's financial capacity and obligations can you make the right decision when sharing an account.
3. Your investing goals are aligned
If you’re considering a joint brokerage account, you probably already have an idea of what you’ll invest for. Here are some things to discuss to make sure the two of you are on the same page:
- Money goals
Where will your potential earnings go? Whether you’re investing for retirement, childcare costs, or major purchases, you should be pursuing the same goal.
- Time horizon
To know your time horizon, find out how long it might take to achieve your shared goals. This is how long you’ll need to work together and so this length of time should be acceptable to both of you.
- Risk tolerance
To prevent conflicts down the road, it’s essential to take only the risks that the two of you can withstand. Know your risk profiles and learn whether they complement each other.
If you have different risk appetites, you can try finding a middle ground or you may consider keeping your investments separate instead.
4. You've set ground rules
Managing investments may be easier when you have a trusted partner who will help you study different options and make informed decisions.
Here are some questions to ask:
- How much will each person contribute to the account?
- How will you make investing decisions?
- What are your guidelines for adding or withdrawing money?
- What steps will you follow when making changes to your portfolio?
When laying down ground rules, make sure that each party is aware of and comfortable with their responsibilities and rights concerning the joint account.
5. You have a plan in case things don't work out
It’s good to approach life and investing with optimism, but you should always prepare for unforeseen events and disagreements that may arise. An exit strategy is a must to protect both your financial interests and your relationship.
Talk about the steps you’ll take in case one of you wants to end the joint account or if the partnership deteriorates. You may want to consult experts to help you decide what to do about potential disputes.
Chasing life goals with a partner can be rewarding, but it requires careful consideration and preparation. Take your time to think things through so you can enter this next chapter with no fear or doubt.
