Lesson 38 The Perils of Company Stock
If concentrated stock portfolios are bad, buying your employer’s stock either inside or outside of your retirement plan makes it even worse.
There are dumb investments, and then there are really dumb investments. Employees that buy any more than token amounts of company stock have signed up for a great deal more risk than they need to.
The general rule that diversification is good doesn’t stop at the company fence. A diversified portfolio helps protect investors against all the things that could go wrong that you can’t even imagine today. Any first-year finance student knows that diversification carries no penalty in return reduction. Diversification is as close to a free lunch as investors can hope ...
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