Q&A: My husband likes to trade stocks. How can I learn more about what he's doing and if it's helping us at all?

QUESTION

My husband thinks he’s Warren Buffet. Not really, but kind of. He likes to trade stocks, but I never really know if he’s making or losing money. How can I learn more about what he’s doing and if it’s helping us at all?

ANSWER

The stock market is very good at attracting participants who believe they can consistently pick winners. The past four years accelerated this trend. Who can forget all the dumb ways people made money during the pandemic? Now, there are more online trading platforms than ever before, giving users quicker access to the markets and FOMO to millions more.

I am not going to dismiss your husband's desire to trade stocks out of hand. There are ways to smartly and safely incorporate trading into your lives. I work with many people who trade stocks in a controlled and disciplined manner, never letting their portfolio interfere with their financial well-being. But checks and balances should exist for a reason. So, let’s discuss what you need to know to make sure your husband is doing right by you both.

First, you need to find out why your husband likes trading stocks. Simple question, but the answer matters. If he is trading to attempt to build wealth, ask him why he believes this is the best way to do that. If he can’t answer in earnest, that’s your first warning sign. My friends who trade for a living will be the first to tell you how hard it is to consistently make money and how much time it consumes from their lives.

For most people, though, trading stocks is about personal interest in the markets. There are ways you both can put healthy guardrails around that. Trading is a risky pursuit by nature, and I generally recommend my clients use no more than 5-to-10 percent of their overall investments for this type of activity. Thus, even a dramatic outcome with that 5-to-10 percent won’t drastically change a couple’s financial situation. Never trade with more money than you can afford to lose. 

You should also agree upon specific rules. For example, when can he add more money to the trading portfolio? If he’s losing, when can he add more?  What happens when he’s making money? You need to decide when and how you take profits and what to do with them. Will they get reinvested or treated as “found money” and used for something fun, like a vacation? All rules should be discussed and written down.

Once rules are established, you probably know where this is going. He has to follow them! And you’ve got to hold him accountable, too! I don’t mean he needs babysitting, but setting the expectation that you’ll sit down for check-ins on a regular basis is important. It’ll increase your trust in the process and hold him accountable—once again, checks and balances.

Here’s the most important part. If trading stocks is causing your partner’s mood or behavior to change, impacting his everyday life or straining your relationship, he needs a break. When “fun” activities of any kind become toxic, they’re never worth continuing. For some, trading stocks can turn from an educational hobby to an addiction fast. Some signs that your partner could be heading in that direction include taking bigger risks, obsessing, stressing, lying, hiding, and losing interest in other activities he once enjoyed. This is why you need to stay involved. The healthiest couples display teamwork so they can be there for each other, no matter what losses or gains take place.

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