Spring like weather is here and the economy and the stock market are seemingly back on track.  Just since October our USA stock market has risen 22%; and the stock market is flirting around levels not seen since May 2008.  This is the first time the stock market has been roaring in a long time, and guess what?

We are going to get greedy, again.  Even though we soon forget about past bad investments (Bear Stearns, General Motors, Washington Mutual and Pets.com… remember the sock puppet), fear and greed dictate most investment decisions.  For many years our 401k’s have effectively been 201k’s but now we are basically “back to even” and again ready turbo charge our retirement plans.  And while there are plenty of stupid investment bets we may make, the dumbest mistake is the easiest one of all to make.

Putting money inside 401k’s or other company sponsored retirement plan into Company Stock, is the Idiot’s plan for riches.

You’d think after Enron and FannieMae we would learn from horrendous past examples and heed sound financial advice… but sadly, no.  Only four out of ten 401k’s offer their company’s stock as an investment option but of those plans that do, on average 1/3 of the employees equity investments are in their own companies stock.  And who is there to help or guide these 401k participants, especially locally?

The majority of these employees are baby boomers nearing retirement; so why do these “boomers” retrace poor investment steps and lack financial planning?  Often it’s because the big wigs in the company have tons of company stock and the workers figure if it’s good enough for the CEO, then it must be good for me too.  And “owning” a piece of the franchise that employs you (ESOP), “hypothetically” is a great motivator for the worker bee.  This type of “rationalization” can be financially terminal.  How the wealthy officers of a company invest their money has no relationship to average Joe Employee and putting more assets into the company breaks…

Investing rule #1; diversification.

According to Vickers Stock Research, (which follows executive company stock trades), over time, the amount of stock sold by U.S. executives outweighs the amount bought by more than two to one. Do you think they know something?

Relying on your company to pay your salary and benefits such as health insurance is enough exposure in one asset for almost anyone; why invest more by purchasing their stock.  One argument used by the employee is we “get to buy company’s stock at a discount.”  A discount to what?  Ask former employees of WorldCom, Lehman Brothers and even companies that didn’t go bankrupt like Bank of America but has lost billions in share price declines, if they would buy company stock at any price, discounted or not?

Owning equities in a long term portfolio is a great idea; but short term the risks must be mitigated not extrapolated by doubling down in your company.  Imagine how much you may already depend on, and how much of your net worth is associated with your employer/company already.

Open your eyes to how much exposure you already have with your employer.  Invest all you can up to any amount the company might “match” in your 401k plan (this is literally “free” money) but look to other less risky investments or strategies for the non-matched amounts.  Here is where you can benefit from a local insurance agent or investment advisor to make a difference for your budget and retirement goals.

We still have in the USA, “real unemployment” rates in double digits (according to DOL) and National Debt above $15.3 trillion.  With no resolution in sight for the “shadow home inventory” foreclosures… look into annuities, low cost index life insurance and other ways to protect your money when investing.  New rules for IRA’s and 401k and 403b plan rollovers change often.  Seek help and advice for your financial road trip… it’s totally free.  Don’t be fooled; social security is an annuity and for lifetime monthly income, an annuity that has “low cost” and low expenses may be ideal for you to consider.

Not that she is the expert on such topics, but even Suzy Orman writes and expounds on the benefits of both immediate and indexed annuities.  And Dave Ramsey disciples preach the benefits of having a personal budget.  Knowledge and information delivered to you by a local professional advisor about safe products with lifetime income benefits and assisted care riders are answers to the questions you may have.

And for those who understand the potential of equity or “stock” ownership long term; would likely love learning what are ”variable” annuities.  Many variable annuities are available with similar 100% principal protection offered by fixed or indexed annuities.  It’s easy to find help, just ask around or contact us.  Start a conversation with a local professional, plant your seed of “knowledge” and then wait for your retirement plan garden to bloom.