I can give you investment and financial-planning theories forever. But the best lessons inevitably come from someone's real-life experience.
column explored just how much of your retirement assets should be in your employer's stock. Some professionals will assert that you shouldn't have any money in your own company's stock. But that blanket statement can't possibly apply to everyone. For many investors, the question is not whether to own company stock, but
The following email from reader
sketches his own experience of having too much company stock in his 401(k) plan and puts a human face on a theoretical topic.
"Great article about the 401(k)s and company stock. Even better that you quoted
saying you shouldn't have much over 30% in a single stock," Seckinger writes. "I just left Schwab after six years and ended up with a 401(k) that is about 70% Schwab stock. (I have a bunch.) It's been a great stock, but now that it's down about 50% from its highs, my account doesn't look so hot! (It dropped before I could move to a rollover IRA.)"
Seckinger's situation illustrates the importance of diversifying your assets. This exercise obviously becomes even more important as you get closer to retirement age. In your 20s or 30s, you might be able to weather a drop like this. But as you get closer to needing and spending this money, hopefully you will be able to broaden your investments and move into some more conservative instruments.
Timing the Market
There's been much discussion about the availability of
after-hours trading to individual investors. But some people are still trying to master trading during daytime hours.
writes: "What I'd much rather see than after-hours trading is the ability to execute a timed market order. You could put in a market order that activates at a particular time, say 10:33 a.m. That way, in the evening you could place an order, know that you'd purchase the stock, but you wouldn't get caught in any opening shenanigans."
Generally, you can't do this online but you could try telling your human broker that you want to execute a market order at a specific time during the day.
It's an offbeat idea, but you could still get hammered. There's no way for you to know where that stock will be trading at a given time during the coming day. Your biggest concern is price -- not the time of day the trade is executed. And this mode of execution won't protect you if trading in this stock is thin and erratic at that point in time.
"It certainly doesn't give any more integrity to the marketplace," says Frank Baxter, chairman of
, a well-known institutional trading firm and brokerage in Los Angeles, Calif. "There just aren't that many mechanical ways of being prudent."
It takes a human being for that.
A more conservative option is to use a limit order, which specifies a price ceiling or floor for a stock purchase or sale. With a limit order, your trade may not get executed, but you're protected from any volatility that "opening shenanigans" may cause.
A Pointless Ban?
Securities and Exchange Commission
recently announced stricter disclosure requirements for fund managers who trade for their personal accounts.
To make it even easier, I declared in a
column last week that personal trading among managers should be prohibited altogether. Managers should be fine investing all their money in their own funds or the funds of their employers.
came up with some holes in my sweeping statement.
"In general I agree, but can't help think of exceptions where the fund or funds are not appropriate for the manager -- for example, a young manager of a bond fund or a manager of an international fund. The manager has to be able to put money elsewhere, and depending on the fund company, may or may not find satisfactory investment opportunities without going outside," Rausch writes.
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Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.