The Automatic Millionaire, Expanded and Updated by David Bach

The Automatic Millionaire, Expanded and Updated by David Bach

Author:David Bach
Language: eng
Format: epub
Publisher: The Crown Publishing Group
Published: 2016-12-26T16:00:00+00:00


WHAT ABOUT INVESTING IN MY 401(k) PLAN?

The investment pyramid can help you select how to allocate the money you put into your 401(k) plan. Chances are, your plan will offer you a menu of investment choices quite similar (if not identical) to the ones listed in the pyramid. If so, you can simply use the percentages from the pyramid to distribute your dollars appropriately. The only noticeable difference may be that if you happen to work for a large, publicly traded company, your plan will also offer you the chance to invest in your company’s stock. If it does, please resist the temptation to overinvest—no matter how great you think your company is.

In recent years, too many overly loyal employees have lost their entire nest eggs because they invested all their retirement money in their own company’s stock. Keep in mind names like Enron, WorldCom, and Lucent Technologies. Until the roof fell in, everyone thought these companies were sure things—no one more than the people who worked for them. When the recession hit, even employees at what were considered stable banks like Bank of America and Citibank saw their equity (that is, retirements) nearly destroyed. There were employees at these banks who were getting ready to retire with the bulk of their net worth in company stock, and overnight their nest eggs were down by 90 percent! In my view, you should never invest more than 25 percent—and if you want to be conservative, not more than 5 percent—of your retirement money in your own company’s stock. Moreover, when you use the Automatic Millionaire Investment Pyramid, consider your company’s stock to be an aggressive growth investment (even if it’s a conservative company). This is because owning a single stock reduces your diversification—and therefore increases your risk. The same thing applies if you work for one of today’s “perfect” companies like an Apple, Amazon, Facebook, Netflix, Google (insert today’s hot company name). Today’s perfect company can change, often overnight. I don’t want your life savings at risk!



Download



Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.