Future Proofing Your Portfolio

Last week Christine Lagarde announced a new policy for the International Monetary Fund going forward. She promised it would be more diversified than the one set forth by her predecessor, Dominique Strauss-Kahn. Her decision to do this is supported by scientific studies that suggest heterogeneous groups make better decisions than those with a uniform background, because they integrate new viewpoints. This leads to better information processing.

The concept, novel enough to hit the newspapers, is one that can apply to family finances as well. While women may under-invest and be more risk averse than men, at least one study revealed that the latter over-trade and thereby glean poorer results than their female counterparts. The study attributed the results to male overconfidence.

Since investment club studies suggest that mixed clubs outperform single sex, it is reasonable to assume that family finances could be strengthened in the same way. A better outcome could be achieved with partners working together to mange investments. They could introduce perspectives that one working along might not have thought of.

The logic behind this concept may, in part, be due to different minor inherent neurobiological traits of the sexes. They can complement each other. Decision outcomes are stronger when different points of view are cooperatively used together. Weaknesses are cancelled out and strong points can be are accentuated.

In a previous article on Health Care Professionals Live, I noted “By working alone, men and women are not able to exhibit their full strengths because they don’t have balance from the opposite sex. But, by working together, they do. The interplay of gender traits improves decision making ability, which leads to more solid investment decisions.”

Like Legarde’s reorganization of the IMF, a re-structuring of marital investment decisions is forward looking and may be just the trick to future proof a portfolio. An extra added advantage is that the partner who is involved little or not at all will become more familiar with family assets and investment decision-making should he or she have to do it alone one day.

In my experience, sharing all investment decisions can be cumbersome and time consuming and the division is rarely equal. Still, partners can make a pre-determination to share under special circumstances. For example, if there is a problem or an unusual decision comes up or if there is a new direction in the portfolio. By escalating marital cooperation to better balance male and female attributes and weaknesses, a good investment approach can be made even better. It is one easy way to future proof a portfolio.