2008: How should individuals think about their investments across multiple accounts?
AUDIENCE MEMBER: Good morning Mr. Buffett, Mr. Munger. My name is Deb Caviello, (PH) and I’m from Windsor, New Jersey.
I’m 45-years-old and have achieved financial independence in that I’m able to manage the money of my spouse and myself full time. And that goes to marrying well, part of that. I was —
WARREN BUFFETT: That can be a big part of it. (Laughter)
AUDIENCE MEMBER: Marrying well in the sense that I received the encouragement and the confidence to pursue that.
WARREN BUFFETT: That’s terrific.
AUDIENCE MEMBER: I was going to ask you a question more along the lines of diversification, but I think I will put it this way. I’ll skew it a little differently.
Each of us has a traditional IRA, a Roth IRA, and together we have a brokerage account. Should the assets in those accounts be separated or better managed as a whole pile?
In other words, have overlapping securities in each account or different types of securities relegated to a specific account?
WARREN BUFFETT: Yeah. Well, I would say your marriage sounds like it’s going to last, so I think you should think of yourself and your husband as a unit.
And I would — you should — in my view, you should look at your overall financial condition and not worry about where the location of the assets will be.
So if you have a net worth of X and you have 20 percent of it in a 401(k) and 30 percent outright and so on like that, just look at the whole picture and decide what mix of assets, what type of assets you want, and don’t treat them as being in separate pots.
I mean, at Berkshire, you know, we own stocks in a whole bunch of different — our insurance companies own stocks in separate portfolios and we even have a portfolio in Cologne as mentioned earlier.
I don’t even think about what entity anything is in. You know, it’s all working for Berkshire, and I think you should — the way to think about your situation is to think about it all working for your family.
Now, if you’re — you strike me as having a very solid marriage, and I think your husband would be crazy if he split with you. But the — if you’re just starting out, you may want to keep your money separate for a while until you see how it plays out, because a significant percentage do end up in divorce.
Listen, I don’t get into marriage counseling very often. (Laughter)
But I can feel the ground sort of disappearing between my feet here. But I will turn it over, therefore, to our marital expert, Charlie Munger. (Laughter)
CHARLIE MUNGER: Yeah. Occasionally, you’ll find an investment that is going to produce a huge amount of taxable income. It’s a junk bond paying a high yield that’s taxable or something.
So some items are more suitable for those retirement accounts that get tax-deferral benefits. But apart from that, it’s all one pot. Sure.