yakers
Thinks s/he gets paid by the post
On another thread "looking For suggestions" I liked Nords posting about his FIL/MIL using mostly CDs and the issue of lack of diversification. Nords analytic tools are great, we just need to remember that we are talking about averages and statistics not absolute truth.
We would consider it crazy but for many years a lot of people worked for one company and bought that company stock and it worked for them. Seems to work less well lately. My FIL worked for Richfield which became Atlantic-Richfield/ARCO which was merged with BP. For 30+ years starting in the 50s as just a professional level employee he amassed the maximum shares he could get under the profit sharing plan. That stock went from strength to strength to strength all those years and is still going strong. Boy did that stock work for him and it is still spinning off dividends and growing for my MIL. After forceful advice from a financial advisor he diversified only a couple years back before he died from one stock it is now maybe 25% of MILs holdings and the rest are diversified funds. But if my MIL was holding just BP it probably would be beating the pants off the diversified portfolio. Sleep at night, well maybe it was confidence or ignorance but they slept pretty well. I know there are cases like Enron and I would advise anyone including my kids to diversify. But it is not the only way. Sometimes real estate works, sometimes someone’s own business and sometimes a single stock can work. It is really necessary to acknowledge the risk but having a few stocks or even one which you really know has worked for some people.
Me, I’m expecting a pension and have the Federal TSP program which is all index funds. And a few DRIPs. And while I agree with Modern Portfolio theory and admire analytical ability like Nords I really cried when that BP stock was sold. How much confidence does one have to have to sell off a solid stock to diversify and watch that diversified portfolio not out perform the single stock for a long time, maybe a lifetime. Diversification in this case is more insurance than maximum portfolio performance but it sure felt like expensive insurance to me.
We would consider it crazy but for many years a lot of people worked for one company and bought that company stock and it worked for them. Seems to work less well lately. My FIL worked for Richfield which became Atlantic-Richfield/ARCO which was merged with BP. For 30+ years starting in the 50s as just a professional level employee he amassed the maximum shares he could get under the profit sharing plan. That stock went from strength to strength to strength all those years and is still going strong. Boy did that stock work for him and it is still spinning off dividends and growing for my MIL. After forceful advice from a financial advisor he diversified only a couple years back before he died from one stock it is now maybe 25% of MILs holdings and the rest are diversified funds. But if my MIL was holding just BP it probably would be beating the pants off the diversified portfolio. Sleep at night, well maybe it was confidence or ignorance but they slept pretty well. I know there are cases like Enron and I would advise anyone including my kids to diversify. But it is not the only way. Sometimes real estate works, sometimes someone’s own business and sometimes a single stock can work. It is really necessary to acknowledge the risk but having a few stocks or even one which you really know has worked for some people.
Me, I’m expecting a pension and have the Federal TSP program which is all index funds. And a few DRIPs. And while I agree with Modern Portfolio theory and admire analytical ability like Nords I really cried when that BP stock was sold. How much confidence does one have to have to sell off a solid stock to diversify and watch that diversified portfolio not out perform the single stock for a long time, maybe a lifetime. Diversification in this case is more insurance than maximum portfolio performance but it sure felt like expensive insurance to me.