I also feel there may be a psychological factor at work when it comes to company stock. I get the sense that some people feel they should own company stock out of loyalty to their company and feel disloyal when they sell shares. I tell people owning a few shares is ok but having a significant percentage of ones savings in your company can be a huge mistake.

I recieved stock in a company I worked at recently and sold the entire stake upon vesting. My reasoning was the same as Ryan’s in that I had a very high exposure to this company simply from the fact that it was my sole source of income. Since I sold it the stock is down 25%.

It’s funny that people mention Buffett. When I recieved shares in my company I asked myself a simple question. Would Buffett own this? The answer was no.

@Dividend Growth Investor, great comment. One thing to keep in mind is that some companies have a policy on taking a negative position on the company whether through selling short or buying a put. Not sure how they would every find out, but it was a policy at my last company and I guess a terminable offense.

I think people often have too much confidence in company stock. One ex-boss wanted to have company stock because she thought we were a good company. We were good as people, but I have no idea how we were financially. She had even less. But it was a good company. Fortunately, she was primarily invested in a Target retirement fund. Not as dynamic, but avoids major screwups too.

I wouldn’t mind getting company stock as the match if I could sell it in a certain period. I’d rather it mimic my choices, however.

Here is what Buffett said to a group of business students:

“If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification. The economy will do fine over time. Make sure you don’t buy at the wrong price or the wrong time. That’s what most people should do, buy a cheap index fund and slowly dollar cost average into it.”

I think that is pretty clear – that almost everyone should use diversification. He also has recently bet funds of hedge funds managers they will not beat the S&P 500 after taking into account their fees over the 10 years. So there he is really indicating more what I think he believes than the quote says – essentially nonly a very few professionals should do it (like him and Munger, maybe Soros, Rodgers…).

Very true. But this is more of a generalization instead of a “one size fits all” article. Buffet is a rare individual who is among the best in the world at what he does. Most people don’t have the time, energy, knowledge or discipline to track their company’s stock well enough to understand all the risks involved with holding too much company stock.

Thanks for the comment, I always appreciate those who take a different view. That always helps me learn!