Do you have investments in stock in the company that you work for? If yes, is it too much stock in the company you work for?
A lot of people think that keeping stock in the company that they work for is good for them because they think that they’re in the position to know their company best. Despite that, there are some reasons that might cause you to reconsider that.
- Myopic Perspective: Just because you’re working for the company, you probably don’t know everything that is going on. If some big liability is looming in the near future, it might overweigh however much good work you and the people around you are doing. This point leads directly to . . .
- The one-two punch: No company is perfect, and most companies can be greatly affected by economic conditions. So if suddenly your company folds up, or even if you are laid off due to economic conditions, you could lose your job and a big chunk of your portfolio at the same time.
- Diversification: Diversity is important to any investment portfolio. Remember that investments are almost like bets, and you shouldn’t expect every single bet to pay off. If you’re focused on your company’s stock, you’re probably not diversifying as much as you should be.
- Policy: Some companies that include their stock in the employer match contributions won’t allow you to sell those assets for a set number of years, so you should be using your personal contributions to diversify your holdings instead.
- Forgetfulness: As time passes, you might not review your retirement accounts that often, and it’s better to have a good range of investments to start with than to change them down the line. We don’t want you to forget to diversify down the line.
We’re not financial planners, but we work with some excellent ones, and we’re happy to recommend some of our favorite colleagues to our clients. If you have more questions, we’d be happy to answer them.