The plain fact is many employees are good at what they do, but they are not Wall Street professionals, nor should they be required to be. In my view, there is a really a very simple solution to all of this: REQUIRE ALL RETIREMENT ACCOUNTS DEALING WITH EQUITIES BE INVESTED IN STOCK MARKET INDEX FUNDS ALONE. So many of the conflicts will disappear if this happens. I am not holding my breath, though.
There is one problem with ENE and many other companies: employees are cornered into investing with their own companies because that is the only way they will receive matching investments from their employers. That is a big problem.
When you speak of diversification, many of these employees are unenlightened to say the least when it comes to investing. Perhaps companies should be required to hire independent investment advisers (unaffiliated with investment banks, brokerage firms, or auditors) to educate them about the value of conservative investing. Here is one good way to start: in any given year 90% of professional fund managers underperform the S&P 500. In any five-year period that goes up to 95%. Anyone short of a full-time market professional should take a long hard look at those figures, put their ego in check, and make the brilliantly simple play: begin at an early age buying the index at regular intervals and sit on it. I'm a full-time bond trader and that is what I tell my friends when they ask me where they should put their money. The 500 largest companies in America. It sounds too simple, but in the end, historically, it's the best play - unless you're a professional and believe you can beat more than 95% of your colleagues. Another statistic I tell them: historically, a long-term (25 years +) investor in stocks received a 100% return every six years. But this means the long haul - 1972-1982 was a terrible period where nothing happened, and these periods must be factored in. Take some excess and invest in real estate, and, if this is feasible, always leave cash equivalent to 2 years of living expenses in a savings account in case of dire need.
Funny, often the simplest advice is the safest - if you have the nerve to take the hands-off position and be patient. Warren Buffett of course is a great example of this. Not very exciting, but solid and far less risky than what most Wall Street professionals would have you do. |
