There it was, this morning, right in the middle of extreme volatility markets and a lot of doom stories in the press. “Why are you still invested in the stock market?” It had to happen once.My wife had heard on the news that all profit since early 2014 has been wiped out and that there is a lot worse to come. Thank you media!
For a few seconds, I was knocked out, but I recovered fast. I took a deep breath and explained to here my approach and thoughts.
I started by acknowledging that indeed it are rough times on the market and that the prices are lower than a few months ago. I also admitted that we have a paper loss. And it should not be a problem for us in the long run.
Then, I used my layered approach as a guideline to explain to my wife where we are investing wise. Here are the core elements
Emergency fund and mid term cash
I reminded her the agreed amount of cash for our emergency fund and mid term saving. It covers between 10 and 11 months of living expenses we have. If I would add to that the cash part of our portfolio, we are above 1 year. Is it enough? What is enough? 100 years is probably enough.
The”sleep well” investments
I briefly reminded her what these were and how they actually play the role as a foundation under our investments. At this time, I had the feeling she started to be reassured
Our invested portfolio
This was a more challenging story to tell. As I read a lot of blogs and books on the topics, I managed to demonstrate to here 2 things
1- While in build up phase, it is actually a good thing to have corrections as we can buy stock at a lower price. In the long run, you buy the assets at an average price. The long term trend of the markets is up.
2- Another way to look at the stock market is the dividend you get. Dividend Artistocrats will do their best to pay you each year. When we come closer to our FIRE date, this is where I propose to take our portfolio.
With this story, I managed to reassure my wife that I am not risking our full assets and that I not jeopardize our future. We discuss occasionally our investment portfolio and the approach that I use. This clearly helps in cases like this when there is some doubt.
To me, the key to have a good financial marriage are
- Make sure you have a financial life plan that makes sense for both. We have such a high level plan. Not only with the financial aspects as mentioned above, but also with some life goals and values as a guidance for the finance part
- Make sure one is in the lead to execute the plan as agreed. The plan only makes sense if it is executed as intended. Automation plays a big role in that.
- Make sure you understand the risks that come with investing and invest according to this. Think about your asset allocation and the consequences on the net worth evolution it has.
For me it was actually quite fun to answer the question. It also reassured myself on our approach. Of course, the real proof is in eating the pudding. Let’s see what 2029 brings us. I am hopeful.
What answer would you give? Do you see arguments that do not make sense? Did you get the question lately?