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Family Inc. by Douglas P. McCormick

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CHAPTER 8

Diversify Your Family Business with the Right Investments

When I was seven years old, my father bought me AT&T stock for Christmas. Needless to say, this was a letdown, and I made clear in no uncertain terms that stock had been nowhere on my Christmas list. His response? If I didn’t like the stock, I was welcome to sell it and buy whatever I wanted with the money.

Fortunately, I didn’t get around to selling my Christmas present for several months—and by the time I looked at it, the stock was up 25 percent. The light bulb went off for me that day, and so began my love affair with investing: Making money without working sounded pretty good to me! With my newfound wealth, my father and I went to see his stockbroker to get a tip for my next investment, funded from my paper route money.

Almost swallowed by the big leather chair in his office, I sat across from my dad’s adviser, Stan, as he explained as best he could in seven-year-old terms the concepts of risk, diversification, and the benefits of a portfolio of investments. Given my new knowledge and based on Stan’s advice, I promptly bought a certificate of deposit that guaranteed a 7 percent return for the next five years. How could I go wrong? I was guaranteed to make money. And I was reassured when my father commended my choice, saying that he, too, had a fixed-interest portfolio recommended by Stan.

It would take me years, lots of schooling, and lots of lost opportunity to realize that Stan’s advice to both me and ...

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