As a newlywed couple, planning for your financial future as soon as possible is typically a smart move. After handling various basics, like creating an emergency fund and setting up retirement plans, it’s wise to come up with an investment plan that helps you achieve other financial goals. If you’re looking for the best investment plan for a newly married couple, here are some options to consider.
What Is an Investment Plan?
In the simplest sense, an investment plan is a strategy, method, or approach for achieving financial goals. Essentially, it allows you and your spouse to figure out your attitude toward investing, such as your level of risk tolerance and what you’re comfortable investing in, as well as how you want to position your investments.
The Best Investment Plan for Newly Married Couples
Usually, an investment plan features a series of steps, allowing couples to get on the same page and select investments that align with their preferred strategy. If you’re not sure where to begin, here is a process that works well for many newly married couples.
Identify Your Financial Goals
First, it’s critical to sit down with your spouse and identify your financial goals, as they may impact how you want to invest. Short-term and long-term goals often require different strategies. As a result, it’s critical to know just how much you need to reach your target but also how quickly you want to secure the necessary funds.
Assess Your Risk Tolerance
Everyone is a bit different when it comes to risk tolerance. Some people are comfortable with more risk since it may lead to higher returns. Others are incredibly uncomfortable with risk, favoring investments that aren’t likely to experience significant declines for their own peace of mind, even if it means less growth potential.
Ultimately, you and your spouse need to determine where you both fall when it comes to risk tolerance. The idea is to achieve something that leaves you comfortable enough not to have sleepless nights while still securing some growth potential. Where that point sits varies from couple to couple, so work together to determine an appropriate level of risk.
Diversify from the Beginning
Diversification allows you to avoid putting all of your eggs in one basket, which can shield you from significant losses if one company or sector experiences a substantial downturn. For newlywed couples without existing investments, the easiest way to begin is with index funds or exchange-traded funds (ETFs), as diversification is essentially built-in.
With ETFs, you can find a variety of options. Some are broader, not unlike index funds, while others focus on specific niches, such as particular sectors or market segments. As a result, it’s possible to find investments that also align with your preferences or values if you prefer.
Adjust Your Portfolio as Needed
When you invest, it’s wise to review your portfolio regularly. Since individual investments may rise and fall in value differently from the others in your portfolio, regular reviews let you adjust your allocations to maintain the right degree of diversification and balance.
Plan for Taxes
When you invest through a brokerage, you’ll need to account for the tax implications. Reinvested dividends are taxable, so you need to account for them every year. Similarly, withdrawals are also taxable, and the rate varies depending on how long you hold the investment before selling.
Initially, you may be able to plan for the taxes on your own. However, as your portfolio grows, working with a tax professional or financial advisor is potentially helpful. They’ll be able to assist you with predicting how various moves impact your tax position, making it easier to plan effectively.
Do you know of any other options that can help newlyweds find the best investment plan for a newly married couple that meets their needs? Have you explored or tried any of these options and want to tell others about your experience? Share your thoughts in the comments below.
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