17 ms·

This looks like a failure with portfolio construction to me. Keeping a lot of your net worth in the stock of one company is not a very good strategy for diversi

This looks like a failure with portfolio construction to me. Keeping a lot of your net worth in the stock of one company is not a very good strategy for diversification. This is especially true when it is the stock of the company that you are working for, because if the company gets into trouble, you might not just lose your job, but also your savings. One easy improvement your this particular case would have been to roll some of the money from GE stocks into bonds and do a classic 60:40 split. If he really wanted to stick with that company, he could have even bought GE bonds since their default risk is reasonably low.

herodotus 8y ago
I have to agree with you. I always took a very conservative approach and divested my company shares in order to diversify, even before I retired. In my case, the pain came not from stock losses, but from their gains. I "lost" so much by selling shares too soon. But now I am diversified and can survive a loss of my holding in my (former) companies shares (I still own some).
- ISL 8y ago
  Decisions can only be judged in the context within which they were made. Diversifying is a wise move for strongly mitigating downside risk. One of the wisest and thoughtful people I know was a long-time and early employee at a major tech company. That friend did exactly the same thing, diversifying early. It is difficult to overstate how successful he has become in life; success need not be measured in dollars.
  - singhrk 8y ago
    I feel like framing your first sentence and put it a place where I can see/show it everyday !
    - annotatedobj 8y ago
      yours (and parent's) comments is why I like HN
  - cortesoft 8y ago
    Right? If we judge every decision by the actual results instead of the information we had at the time, everyone made a stupid decision by not buying a lottery ticket that had the correct numbers on them yesterday.
z3t4 8y ago
The whole reason stocks where invented was so that you could spread the risk. Instead of owning 100% in one ship, you owned stock in many ships, so if one ship sank you didn't loose it all.
- thoth 8y ago
  Huh? Stocks (shares) were invented to raise capital for businesses.
  - dmoy 8y ago
    I think GP was talking about the historical (1600s) perspective, in which stock was literally created for both raising capital and reducing risk in maritime stuff (specifically East India company).
  - z3t4 8y ago
    Yes, so that many people can invest in the business. And the investors invest in many businesses.
baldfat 8y ago
I blame Corporations getting rid of Retirement Plans for the sake of profit. My father's side grandfather had 2 retirement plans, 1) Navy Seals (12 years) 2) NYC Handy man (25 years) My mom's side grandfather 1) Custodian in NYC 20 years + 2) Jazz Musician Union 10+ years. They both were able to live a decent life after retirement and didn't work a single day afterwards. This will not happen for me. I also have a privatized plan for 15 years but my son had cancer for 5 years (Drained my retirement early) and we had 5 kids and chose to have my wife stay at home for about 7 years. Not very easy to save, heck I have no debit outside of mortgage and some student loans still. Zero credit card debit and no car payment. I know I am ahead of the curve but what about everyone else up to their necks in debit? The system is broken and most people don't save enough and a few can't. https://www.bloomberg.com/view/articles/2017-01-03/the-401-k-problem-we-refuse-to-solve https://www.bloomberg.com/view/articles/2017-01-03/the-401-k...
- notyourday 8y ago
  It is about choices. Having 5 kids was a choice.
- pc86 8y ago
  Corporations have not gotten rid of retirement plans, they've gotten rid of unsustainable defined benefit retirement plans (pensions) in exchange for defined contribution retirement plans (401ks).
  - cortesoft 8y ago
    While I agree with you, I think it is important to note that defined benefit plans aren't INHERENTLY unsustainable. If you do the math right and are realistic, you can off them. You just can't underfund them or assume unrealistic stock market gains.
    - lotsofpulp 8y ago
      They're unsustainable because they require the ability to predict what will happen in the world 10,20,30+ years into the future, a feat that no one is capable of, hence the decline of defined benefit pensions. Except for those that can lean on taxpayers to make up for the miscalculations and erroneous assumptions.
gaius 8y ago
This looks like a failure with portfolio construction to me I’m sure that’s a very useful piece of advice for a Worker for whom “construction” means, you know, actually making stuff, not financial trickery

herodotus 8y ago

I have to agree with you. I always took a very conservative approach and divested my company shares in order to diversify, even before I retired. In my case, the pain came not from stock losses, but from their gains. I "lost" so much by selling shares too soon. But now I am diversified and can survive a loss of my holding in my (former) companies shares (I still own some).

ISL 8y ago
Decisions can only be judged in the context within which they were made. Diversifying is a wise move for strongly mitigating downside risk. One of the wisest and thoughtful people I know was a long-time and early employee at a major tech company. That friend did exactly the same thing, diversifying early. It is difficult to overstate how successful he has become in life; success need not be measured in dollars.
- singhrk 8y ago
  I feel like framing your first sentence and put it a place where I can see/show it everyday !
  - annotatedobj 8y ago
    yours (and parent's) comments is why I like HN
- cortesoft 8y ago
  Right? If we judge every decision by the actual results instead of the information we had at the time, everyone made a stupid decision by not buying a lottery ticket that had the correct numbers on them yesterday.

z3t4 8y ago

The whole reason stocks where invented was so that you could spread the risk. Instead of owning 100% in one ship, you owned stock in many ships, so if one ship sank you didn't loose it all.

thoth 8y ago
Huh? Stocks (shares) were invented to raise capital for businesses.
- dmoy 8y ago
  I think GP was talking about the historical (1600s) perspective, in which stock was literally created for both raising capital and reducing risk in maritime stuff (specifically East India company).
- z3t4 8y ago
  Yes, so that many people can invest in the business. And the investors invest in many businesses.

baldfat 8y ago

I blame Corporations getting rid of Retirement Plans for the sake of profit. My father's side grandfather had 2 retirement plans, 1) Navy Seals (12 years) 2) NYC Handy man (25 years) My mom's side grandfather 1) Custodian in NYC 20 years + 2) Jazz Musician Union 10+ years. They both were able to live a decent life after retirement and didn't work a single day afterwards. This will not happen for me. I also have a privatized plan for 15 years but my son had cancer for 5 years (Drained my retirement early) and we had 5 kids and chose to have my wife stay at home for about 7 years. Not very easy to save, heck I have no debit outside of mortgage and some student loans still. Zero credit card debit and no car payment. I know I am ahead of the curve but what about everyone else up to their necks in debit? The system is broken and most people don't save enough and a few can't. https://www.bloomberg.com/view/articles/2017-01-03/the-401-k-problem-we-refuse-to-solve https://www.bloomberg.com/view/articles/2017-01-03/the-401-k...

notyourday 8y ago
It is about choices. Having 5 kids was a choice.
pc86 8y ago
Corporations have not gotten rid of retirement plans, they've gotten rid of unsustainable defined benefit retirement plans (pensions) in exchange for defined contribution retirement plans (401ks).
- cortesoft 8y ago
  While I agree with you, I think it is important to note that defined benefit plans aren't INHERENTLY unsustainable. If you do the math right and are realistic, you can off them. You just can't underfund them or assume unrealistic stock market gains.
  - lotsofpulp 8y ago
    They're unsustainable because they require the ability to predict what will happen in the world 10,20,30+ years into the future, a feat that no one is capable of, hence the decline of defined benefit pensions. Except for those that can lean on taxpayers to make up for the miscalculations and erroneous assumptions.

gaius 8y ago

This looks like a failure with portfolio construction to me I’m sure that’s a very useful piece of advice for a Worker for whom “construction” means, you know, actually making stuff, not financial trickery