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Stay Diversified FROM Your Employer

by Michelle Smalenberger / July 15, 2021

Do you know where your money is invested?  Whether you invest in your company’s retirement account or you choose your own investments what do you really own?  You remember the decision you have when you need to pick from a list of funds available to you. Often you see the name of a fund and some description or performance history, but you don’t really know what that fund is invested in.

As part of the funds available to you a choice to buy your employer’s stock could be an option.  Be careful that you don’t invest too much into your company. Follow along to see what we mean and why it’s important to stay diversified.

Diversified Scenario 1:

-You invest in your company’s 401(k) choosing from your list of choices (mostly mutual funds)

-You buy some of your company stock, at a discount, through your employer stock purchase plan

-Your salary and benefits come from your employer to pay for the work you do.

*In this scenario the main thing dependent on your employer continuing to be a stable company is the salary and benefits paid to you.

Diversified Scenario 2:

-You invest in your company’s 401(k) choosing from your list of choices (mostly mutual funds)

-You have a pension plan available to you at retirement

-Your salary and benefits come from your employer to pay for the work you do.

-You buy company stock regularly, at a discount, through your employer stock purchase plan

*You can start to see in this scenario that not only is your current financial situation dependent on your employer because they pay your salary and benefits, but your future financial situation is more dependent on them being successful, because you have a pension benefit that you will depend on in retirement too.  It is important then, that the investments you choose in your 401(k) are diversified away into other companies.

Diversified Scenario 3:

-You invest in your company’s 401(k) choosing from your list of choices (mostly mutual funds)

-You own your own company in the technology space

-Lastly you have additional investable assets outside of your company benefits offered

*In this scenario where you own all or a portion of a company that pays you a wage. You are heavily invested in the success of that company.  You plan for your business to succeed and potentially grow so in the future you potentially have an asset to sell. Most importantly here, while you are building wealth, is that your additional assets are not invested in the same sector (technology) as the rest of your entire portfolio (your business and wages).  In the past 10 years the technology sector has been a great place to invest so you can see how easily it would be to over allocate to this one sector.

You have to know what you are invested in so you can start to change your allocation if necessary.  Even if you only investment in your employer’s retirement account it is possible to know the actual companies you own.  We believe that when you know what you are invested in it can make investing and saving more fun! If you know that you own Apple stock, for example, would you be more likely to purchase products from their store?  If you know you purchase products from a company you invest in then you can feel some type of ownership when the company continues to succeed.

Investing can be understood.  Just because you may not have been taught, it’s not too late.  Your financial advisor should teach you as much as you want to know, and offer to help you understand!

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Contact us today for a free 30-minute consultation!

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Michelle Smalenberger

I have a passion for helping others develop a path to financial success! Through different lenses on your financial picture, I want to help create solutions with you that are thoughtful of today and the future. I have seen in my life the power of having a financial plan while making slight changes of direction from time to time. I believe you can experience freedom from anxiety and even excitement when you know your finances are on track.