Monday, April 6, 2009

Consider All Sources of Income When Forming a Portfolio

When you think about your portfolio, take into consideration more than just the assets sitting in your brokerage or mutual fund account. For instance if both you and your spouse work in the high tech industry, maybe you don't need to have so many high tech stocks. Or if you work in real estate and have a couple of investment properties, it might not make sense to invest in REITs since a real estate crash would affect your job, as well as your investments.

Similarly, although you may really like your employer, holding substantial assets in company stock is dangerous. The classic example of this is the Enron case, where employees not only lost their jobs, but many also lost their retirement savings. Either one of these would be terrible on its own. Having both happen is devastating.

Consider your entire financial situation when creating your portfolio so you won't have any unexpected surprises.

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