Investing and Marriage: Risks and Returns

I just returned from Omaha attending the Berkshire Hathaway annual shareholder meeting.unnamed The meeting was filled with nuggets of humor and wisdom. As I meditate on the meeting, I’ve observed several interesting comparisons between investing and marriage. Perhaps the comparisons are because I have been married to my wife Julie for 29 years and our kids are either married or moving closer to that path. So, what does investing have in common with marriage? Both involve risks and returns. I identified 7 common themes:

Do Your Homework

Investing and marriage are major decisions. Research your investment. Make sure you understand what you are buying. Do you trust management? Do they have favorable prospects? Don’t rely on emotion or hype. Likewise with marriage, get to know your potential spouse’s family. Understand their roots. Understanding your potential spouse’s past helps to understand who they are today.

Make a Decision

Even though both are important decisions, not deciding is the worst choice. There are no guarantees but after doing your homework, make a decision and stick with it.

Make Regular DepositsInvesting

Once the decision has been made to invest in marriage or in the markets, make regular deposits. For marriage, that means continual giving. Spend time together. Don’t give just what you think is important, learn what your spouse values and give generously. Likewise, investment growth increases by making regular deposits. The two best methods are to reinvest dividends and invest through payroll deduction. Make the deposits automatic so no thought is required.

Long Term Focus

Both benefit from a long term focus. A good investment likely has its up and downs. However, in the long run, it produces great returns. But, there is plenty of short term volatility. The key is not to over react. Rather focus on the long term. The same is true for marriage. I have the privilege of looking back 29 years. You may be just starting in your marriage. Imagine 25 years later. What do you envision as being important and what is considered “noise”? Try to ignore the noise and monitor the key issues. An example from this weekend was a reporter asked Warren Buffett whether the market is due for a correction. Warren, in his typical wise long term perspective, quickly recognized this as “noise” and not the right question to ask. His response was: “If the investor is concerned with the short term, they should not be investing.”

Don’t Fight Change

It is common in marriage to observe your spouse is not the same person you married. The most likely reason is that you didn’t know your spouse as well as you thought when you married. However it will be true your spouse changes. Consider change as a good thing. If there is no change, there is no growth. Change cannot be forced, but should be appreciated. Certainly, if the change is for the worst, there are exceptions. But, be patient. You have your blind spots. Your spouse puts up with a lot more of your “warts” than you realize. Likewise, change is part of investment. Markets and products change. Don’t fear the unknown.

Cautious of High Expectations

Marriages are strained when high expectations become part of the equation. We humans are more fragile than we think. There is an art to providing encouragement and “coming along side”. It takes time, trial and error, and patience to develop that skill. Don’t create an atmosphere where your spouse is constantly striving to meet your expectations. Likewise, markets often create high expectations for investment performance. That can lead to short term volatility which should be ignored.

Balance Sheet Change

Certainly converting cash to a long term investment changes the asset picture. A good marriage is a priceless asset that money cannot buy. Recently, however, I identified a startling “liability”. As an actuary, contingencies are always on my mind. It is not likely that my spouse and I will both die at the same time. Once one of us dies, there will be an incredible void that won’t be able to be replaced. That certainly will be a difficult transition. However, the joy of the journey and the growth that results far exceeds the pain of that transition.