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  • August 29, 2008 01:28 PM EDT by Cody Willard

    You're an Idiot for Putting Your Retirement Money Into the Same Company You Work For

    I interrupt this vacation for a special public announcement.   One of the most important Flip Its any American can do is to ignore the advice from financial planners and the oft-under-educated and ill-equipped advisors at your company that always try to convince you to invest in the stock of the same company you work for.

    From idiotically foolish 401(k) and IRA plans that will match your investment if you'll put your retirement savings into helping prop up your companies stock with that added, consistent demand.   I'm not sure how many times I've told viewers on Happy Hour to ignore those idiots, but it's enough that several people at Fox have come to ask me to explain more about it.

    And why do I keep harping on this conventional wisdom of using those matching funds and other supposed company-sponsored supposed wealth-builders that everyone tells you is so important for your future well-being and days of retirement?

    Worker Assets Shrink at Fannie and Freddie
    New York Times, United States - 12 hours ago
    The employees of Fannie Mae, and those of its counterpart Freddie Mac, are reeling from financial blows themselves as the mortgage finance companies lurch ...

    Hopefully some of those (now) poor employees at supposedly very safe companies that were even sponsored by your tax dollars heeded the advice and got the hell out of their company's stock before it crashed 90% over the last few years.

    In the last couple years of running my hedge fund, I owned a lot of News Corp the stock (NWS), and I often suggest it as a good buy to anybody who asks me for my opinion on it.  Indeed, I wouldn't work here if I didn't believe in its future and its ability to grow.

    But anybody wanna guess how much of my savings, investments, and retirement funds I have in News Corp, the parent of the company that I depend upon to write my checks and keep my present day life operating?

    Let me repeat -- DO NOT EVER INVEST YOUR RETIREMENT IN THE STOCK OF THE SAME COMPANY YOU GET YOUR INCOME FROM!

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monkeyfurball

Your an idiot for calling people idiots.

September 4, 2008 at 1:39 pm

Annemarie

Most company's protect thier employees and do not allow you to invest more than 10% of your portfolio in the company stock to protect the employee from potential losses.

September 3, 2008 at 11:05 pm

Tommy

Like most journalists who have limited space to post your views, you are only partially right. Experts say it takes 15-28 individual stocks to become completely diversified. This means you should have no more than 7% in any individual stock if all are held on an equal basis. This is referred to as unsystematic risk or risk that you can diversify away to a very large degree. Systematic risk is undiversiable which means you could have 1,000 stocks and still have principal, market, interest rate, currency risks etc. Ownership in the stock of the company you work for means you have some skin in the game. You work harder, smarter and turn the lights off at the end of the day to cut expenses. It does present more risk to your overall portfolio and you have compounded it by having your income also tied to your portfolio returns. Many people have retired only due to their exposure to their company stock. Long story short, never say do anything 100% - it's not prudent. If an employee feels good about their companies prospects, by all means invest in the company stock; but keep the exposure to less than 10% of your entire portfolio value.

September 3, 2008 at 1:01 pm

about this blog

  • Cody Willard is an anchor on the FOX Business Network. Willard is also the principal of an investment management company. He was a long-time featured columnist for the Financial Times and TheStreet.com as well as a regular featured economist and stock picker on CNBC's ''Kudlow & Company."

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