Investing In Your Company’s Stock Is Risky
Image from the Wall Street Journal
For many of us working stiffs, our salaries from our employers are our biggest investments. Too often we don’t view our job as an investment, but it is. You are investing your time and efforts in exchange for your salary.
Today I read a great article in the Wall Street Journal titled, The Perils of Investing in Your Employer. This article does a great job in cautioning people from investing too much money in their company’s stock. Here is a great quote,
If you’re hoping to earn $50,000 a year from your employer for the next 20 years, in some ways it’s as if you already have $623,000 of your wealth tied up in the company. That’s what an equivalent annuity would cost you, assuming 5% interest.
I couldn’t agree more with the premise that investing in your company’s stock is risky. Since our salaries comprise such a large portion of our income, you are invested enough in your employer. You are betting that they will be in a financial position to keep employing you. And, you hope that through your efforts and others the company will grow and you will make more money in the future.
This is enough of an investment in your employer. Don’t put your savings in your employer’s hands too. Don’t allow notions of loyalty persuade you to make risky financial decisions.
You are not being disloyal by selling your company’s stock. You have proven your loyalty already by working there. So, make sure that you are not putting all of your eggs into one basket and diversify your investments.
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