Diversification is talked about quite readily in investing discussions. We all know it’s something very worth applying to our portfolios so it won’t be killed by one bad position or a group of related ones. It should stop at your stocks account, IRA, or 401k, though. Diversification needs to be applied at all levels of your financial life. Recent events scream that, but are people listening?
Remember Enron? Loads of employees at that company not only lost their jobs but their life savings when that company went down earlier in this decade. It was a big deal with loads of press, jail terms for management, and law suits.
Now flash forward to today. We see on TV people walking out of Bear Stearns with boxes of their personal belongings in their hands an hear that one third of the float of BSC was owned by the employees – folks potentially now out of a job. Is this is rewind? Lost jobs and blown life savings. There have already been law suits filed and lots of questions have been asked about how the CEO could come out and be so positive on CNBC only days before the company basically went bankrupt.
When are folks going to learn that putting their income and their wealth in the same basket sets you up for a nasty surprise if things go wrong?
Please! Please! Learn the lessons.
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About the Author
John Forman, author of this blog, has traded for more than 20 years, is a professional market analyst, and authored The Essentials of Trading. He is an active participant in trading forums, consults for trading related businesses, as published literally dozens of trading articles, and has been quoted in a number of books and in the media.
** See John’s full bio.
