Wednesday, March 26, 2008

A tragic 401k reminder from Bear Stearns ...

For years I have been listening to financial pundits on tv tell us not to invest our 401k's in the company that we work for. For all of their claimed financial savvy, apparently many Bear Stearns employees failed to heed this advice and are now likely to lose not only their jobs (it has been reported that J. P. Morgan will can 50% of the Bear Stearns employees), but have also lost virtually all, if not all, of their retirement, and for some, life savings.

I don't profess to be a financial person, but those that I listen to are adamant about diversifying retirement and savings. That means never invest in the company you work, so that if it fails, you only lose your job, not your job and life savings. It also means investing outside the sector that you work in ... After all, how good of a plan would it have been for a Bear Stearns employee to invest all of his/her 401k stock in Thornburg Mortgage (now trading at less than $2/share)? Many of the pundits recommend investing across a minimum of 5-7 other sectors.

Even knowing the advice of the pundits, I am regularly guilty of being too invested in cash equivalents (which historically pay too little), or too invested in one sector. I wish I had the self-discipline to follow the advice of the pundits!



Buying Time said...

I have to admit, I was rather surprised to hear these stories in the news. Primarily because, the these folks work in the financial sector, as you pointed out, but also because the nation had such a stark reminder in recent years with the collapse of Enron.

Ed said...

"This time it's different."

"It can't happen here."

"I'm very aware of what is going on in *my* company."

(Quotes likely heard in the BS hallways.)