Paul, O.K., now I've got you. These are financial planning questions and I am in no way, shape, or form a financial planner. Just a money manager and analyst. So, my answers will have to be read with that in mind.
There are two basic schools of thought here:
1. Diversify your holdings.
2. Invest in what you know.
No surprise, I favor the first. For example, when I was at American Capital, I received a bunch of options on the co. stock. The options, of course, are call options, not puts. I asked about puts, and everyone laughed, sort of nervously. But as I explained, my job was a call option on the co. doing well. What I needed was an investment in case that wasn't the result. Of course, I had the fund I managed, and that was my hedge, as its returns were not related to the co's fortunes.
I prefer eggs in several baskets. What I have noticed on SI and from folks I meet face to face, that most want to invest in what they think they know. And that would be o.k. if we were all Renaissance people. But too many of us are too specialized. So, I see doctors buying drug stocks, mutual fund managers buying brokers, tech nerds with portfolios 100% in tech stocks (especially on SI) and oil people owning nothing but energy names. I don't think that is smart.
It is tough to cut the umbilical cord and move into uncharted (at least for us) areas.
So, if somebody has private holdings that make his or her total portfolio lopsided, I would diversify away from those areas. And you definitely have to take the main source of income into account when setting up investments.
MB |
