Stock Options For Dummies by Alan R. Simon

Author:Alan R. Simon
Language: eng
Format: epub
Publisher: Wiley

Understanding the Principles of Personal Financial Planning

Volumes and volumes have been written about personal financial planning. I won’t attempt to address all the important points here; however, because you must think about your stock options in the context of your overall financial picture, I want to emphasize a few key points that should guide your thought processes.

(If you are looking for detailed information about how to manage your personal financial picture, then you should check out Personal Finance For Dummies and Investing For Dummies, both written by Eric Tyson and published by Hungry Minds, Inc.)

You need to keep the following principles in mind throughout this chapter:

Allocating and diversifying your assets. You shouldn’t put all of your financial assets (eggs) into a single basket. Sure, if you happen to guess right (and the correct word is guess) and concentrate the majority of your assets in an investment like your company’s stock and if that investment outperforms most others, your overall returns will be stellar, but:

• Your chances of guessing right month after month, year after year, are pretty much nonexistent. Sooner or later, you’ll pick the wrong investment and wind up facing significant losses.

• Even sophisticated investors and entrepreneurs who do hit the jackpot and wind up with fantastic gains from a single investment eventually take some of their profits and rellocate those funds to other investments — in effect rebalancing their respective portfolios.

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