No. of Recommendations: 10
Red Sturgeon's point on diversification and asset allocation is spot on. I have worked for several firms where bonuses were awarded in shares. It was seen as disloyal to sell them so many kept them on - which I am sure made them feel warm and comfortable.

But if you work for a firm, you already have a large part of your assets (aka you) tied up in that firm. Adding to that by holding shares just increases risks. My father held a lot of stock in a company back in the 1970s (IOS) as he believed in Bernie Cornfeld His investment evaporated - he even invested around £50 of my pocket money - I still have the bearer shares as some form of compensation.

More recently, I watched the 2008/9 crash unfold and heard stories of Lehman's employees who had almost been "bullied" in to keeping their stock awards. Those that did often lost their houses when the banks spotted that the collateral had evaporated. One was more farsighted and decided to sell his Lehman's stock and put it in to a "safe" bank - aka Citibank. Well at least he did have some value left at the end.

Lots of Enron employees stuffed Enron stock in to their pensions as they "believed" - I saw one report where a 60 year old saw a $800k pension evaporate.

Belief in your firm is a good thing - but concentration of risk is not. And diversifying in to other companies in the same industry does not remove industry risk. Sadly, this advice is all to late now.
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