4 ms·
Assuming a robust job market, you won't have much exposure to a company's success/failure other than through equity, so I don't think diversification makes sens
by bjacokes 10y ago
Assuming a robust job market, you won't have much exposure to a company's success/failure other than through equity, so I don't think diversification makes sense as a reason to avoid equity compensation.
I could see this being a valid argument if there were systemic risk to the industry that could have a simultaneous effect on your equity and salary compensation. e.g. if you're a truck driver and get equity in your company, then automated trucks could be disastrous and you'd want to diversify away from the equity.
- sdenton4 10y agoThe 'valid argument' is that if you're kicked out of your job as part of a large downsizing, all of that equity has essentially turned to scrap paper simultaneously. This is completely endemic to having equity in the company you work for: there's a tight linkage between the thing that pays you monthly and your investment portfolio. Put another way, you're right that the equity is the only way that you are exposed to the company's success, but there are catastrophic ways you can be exposed to its failure.
- MaulingMonkey 10y ago> Assuming a robust job market Bad assumption. I've known people who lost a large chunk of their retirement funds in the dot-com bubble, despite "diversifying" within it. More recently, there was the housing bubble. Both of these had implications for the job market - and salaries - at the same time. Some people would argue we're in the middle of a tech, games, or VC bubble - and while they might be wrong, diversification is what you do to mitigate the risk in case they're right.