5 Pitfalls of Investing To Avoid During a Divorce
Written by
Chris Adam
Edited by
Rebekah Evans
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Money may not buy happiness or love, but divorce can certainly cost a sweet penny. In fact, according to LegalZoom, the average cost of a divorce can range from just $500 to well over $11,000.
One aspect to consider when it comes to finances and divorce is money put into investments. According to The Institute for Divorce Financial Analysts (IDFA), actively investing assets while going through a divorce comes with some big risks. Further, a lot of places have legal and ethical restrictions on handling marital assets during proceedings for divorce. Here, some expert ambassadors from IDFA share five pitfalls of investing to avoid while going through a divorce.
Also here are money issues that tend to lead to divorce.
Taking Too Much Risk
According to Nancy Hetrick, certified divorce financial analyst, accredited wealth management advisor and senior financial planner with Strategic Portfolio Solutions, one pitfall to avoid is taking too much risk.
“If investment values swing significantly negative in the pendency of a divorce, you may be in the unfortunate position of having to absorb losses without sharing them with your spouse,” Hetrick said.
Being Too Aggressive
Per John Duffy, certified divorce financial analyst with Zen Divorce Solutions, some divorcing investors have an aggressive risk tolerance.
“During the sometimes lengthy divorce process, significant market dips and downturns can create unrealized losses that affect both the marital standard of living and legal implications of the division of property,” Duffy said.
Dealing With Emotions
“Investing during an emotional state can cause an investor to make atypical errors in judgement,” Duffy explained. As much as possible, try to separate emotions from any of your investment strategies.
Selling Stocks Unnecessarily
Tax liabilities are also crucial to consider. According to Duffy, many portfolio owners starting with divorce may anticipate liquidity needs and sell stocks unnecessarily, causing tax liabilities that will reduce the community or marital property.
Not Seeking Professional Guidance
Turning to the right professionals is always a good idea. “Don’t take advice from your financial advisor,” Hetrick said. “Your financial advisor is not likely trained in the intricacies of divorce. Consult with a certified divorce financial analyst professional for the most reliable guidance.”
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