When both, your spouse and you are earning, the savings capacity of your household and the potential to create wealth is multiplied. However, should spouses invest in the same set of mutual funds or is it better to maintain different sets of funds for both? Read on to find out.
The concern of investing in the same funds arises from the need to diversify. Diversification among funds is necessary, but this needs to be done carefully. For instance, buying 5 different large cap funds isn’t a great way to achieve diversification, because any large cap fund could have a number of overlapping stocks in the portfolio. So if you have a good large cap fund, adding a mid-cap fund to your portfolio makes for good diversification. And this could come from a different Asset Management Company than the first one, giving fund management a chance at diversification as well.
To keep things simple, the decision to invest in separate funds or the same funds depends on whether both spouses have clubbed their finances and maintain a joint account or whether they have separate accounts. Of course, you could also have a joint account for some expenses and separate individual accounts too.
Here are some useful tips to help you decide whether a couple should invest in separate funds:
When investments of both spouses come from a joint account and are managed by one of you, it makes sense to keep investments uncomplicated too. Keep a couple of good funds based on your goals, asset allocation needs and manage them.
Are the two of you planning to tackle various goals together or separately? For instance, is one of you going to invest in education for children and the other for your retirement? If yes, then you could choose different funds for achieving those different goals.
In households that have Equated Monthly Installments (EMIs) to pay, it helps to manage repayments and household expenses with the salary of one spouse. Investments can come from the salary of the other.
Ultimately, like in other financial matters, the decision of how a couple can manage investments should be arrived upon mutually. It could be immensely helpful to hire the services of a financial advisor to chart out an investment plan to help achieve your goals as a couple and a household.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.