Say It With Me: Diversification!
A couple months ago I was sitting in yet another ALL DAY MEETING with a few of my peers at work and saw something that shocked the hell out of me. I was sitting behind my coworker who is probably about 55 or so. The way we were sitting was somewhat sideways looking forward to a big LCD display that had the meeting content on it. Because he was between me and the LCD screen I happened to be staring straight at the screen of his laptop whenever I looked down.
This guy, we’ll call him “Bob” decided to bring up his 401K account through our internal website. While I tried not to look, I couldn’t help glancing in his direction a few times. At one point he brought up his asset allocation screen that showed where his money was invested. I was SHOCKED to see that he had 100% of his $700,000 retirement fund in the company stock. Now this isn’t some kind of tiny company stock. Think Fortune 100 blue chip stock. Regardless, I couldn’t believe Bob had his entire retirement account in ONE stock. Our company stock has been relatively volatile compared to the overall market and frankly we are always one bad news article away from wild swings in the price. If Bob was 25 I wouldn’t really have thought twice about it (although if he was 25 and had a $700K retirement account I probably would have left my wife and tried to marry him). Unless he’s planning on working to 75 or 80, I just can’t comprehend why he’d think it was a good idea to have zero diversification in his retirement account. Of course maybe this account is a small portion of his overall net worth and I’m just imagining the horror that might be, but statistically, I think he’s probably just got all his eggs in one single basket.