I was reading this month’s Money magazine that featured Julia Andres, a 58 year old sales executive. In 2000, she had about $775,000 in her retirement savings pretty much all invested in Citigroup because she worked there for around 20 years.
She basically lost 50% of everything she had by 2002 because of the tech bubble [1] and after that, she worked with a financial planner to slowly diversify [2] her portfolio. The great story was that by 2004, Julia sold all of her Citigroup stock and instead were invested in a mix of stocks and bonds [3]. By 2008, she only lost 20% instead of 95% that a Citigroup stock would’ve lost (she would’ve lost another 3-4% of the original investment in 2009).
To put it into context, she would’ve had about $20,000 left in her retirement savings if she held onto her Citigroup stock.
Let this example remind you why you shouldn’t put all your eggs in one basket. Do you still have a significant portion of your funds in one asset class [4] (worst yet, in one stock)? If so, make sure you rebalance your portfolio or risk losing it all.
Don’t say I didn’t warn you.