How the Ideal Portfolio Is Like the Ideal Spouse

9. Pop the question.

Valentine’s Day is upon us. It’s a date associated with love, which stores selling greeting cards, chocolates and flowers work nonstop to remind us. It’s probably one of the most difficult days to get a restaurant reservation. It’s also a day when people propose marriage. A survey on Chillisauce.com found that 36% of respondents felt Valentine’s Day was the most romantic day to propose. Now let us have some fun.

Every parent wants the best life possible for their children. It might sound Victorian, but this includes marrying well. If parents could choose the ideal spouse for their child, factors like family, education and future prospects would rank high on their list of favorable attributes.

Now let us image your client’s investment portfolio was their “child.” How would their stocks and bonds size up if it was a real-life person contemplating marriage?

1. Education.

In real life, this involves the level of schooling the person has attained, their grades and the quality of their school. The ideal candidate might be studying to be a doctor or lawyer at a prestigious university. They would earn good grades because they apply themselves to studying.

Your client’s portfolio: Is it built with professional advice from a licensed, qualified advisor or it a “student” who drifts through school, buying stocks here and there without an understanding of why this idea should work out?

2. Future prospects.

If we are talking about people, this person has a good career track ahead of them. They might be in IT or engineering with a path into corporate management. They would be in a field projected to have expanding demand. The Bureau of Labor Statistics (BLS) produces the Occupational Outlook Handbook (2) projecting how fast industry employment should grow over a ten-year period.

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Your client’s portfolio: Is it aligned with trends that are expected to drive the economy in years to come?

3. Financial stability.

If they cannot get a potential suitor with professional credentials, most parents at least want someone who is “settled.” They are in a solid career where they are paid well and have job security. The police, fire department and teaching fit into this category. These fields are often unionized. They would prefer their child not dating a freelancer or someone in the gig economy.

Your client’s portfolio: Is it heavily leveraged on margin? Are they buying short-dated options, always looking for the big score?

4. Potential for offspring.

Parents want grandchildren. They do not want their family name to die out.

Your client’s portfolio: If the portfolio was a person, your clients would want to see signs it would keep growing into the future. If they are adding money monthly through dollar cost averaging and reinvesting, contributing the maximum to retirement accounts and putting your bonus into your portfolio, those would be positive signs pointing toward wealth that would last for generations. 

5. Attitude toward risk.

Although people carry insurance to protect against unexpected risk, most parents would not want to see their child dating a daredevil who counts skydiving as a weekly hobby. They would want them to be a responsible driver, coming to a complete stop at Stop signs too.

Your client’s portfolio: Is it aligned to the asset allocation model consistent with the client’s risk profile? If you dabble in the occasional risky investment, is this in line with the traditional investment pyramid?

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6. Honesty.

Few parents want their child to marry into an organized crime family. They do not want them to gain a reputation for cheating at cards or get thrown out of casinos.

Your client’s portfolio: Do they make investments based on inside information? Do they try to kite checks or game the system? Does your compliance department take an intense interest in your trading activity? Does the IRS feel compelled to audit you on a regular basis?