Forbes reported earlier in the month that Bill Gates is no longer the richest man in the world. That honor now goes to Warren Buffett. That’s right Bill, you’re no longer #1!! In your face! Haha…can you see me catching up to you?!? Are you scared? Somehow I don’t think he is.
The article goes on to say that Gates would have remained the richest man had Microsoft not made a bid on Yahoo. Between January 31st (the day before the Yahoo bid) and February 11 (when Forbes locked in prices to determine their richest people) Microsoft stock dropped 15%! A majority of Gates’ wealth is from Microsoft stock.
With Gates’ worth estimated at $58 Billion I don’t think the 15% drop will hurt him too much.
But imagine if your net worth dropped 15% in a matter of weeks. What if it dropped more? This is a real possibility if all of your investing eggs are in one basket. What if you worked for Bear Stearns with five years left to retire and most of your pension/retirement money was in Bear Stearns stock or profit sharing? You wouldn’t be very happy now.
This situation is probably more common than we think. Many lost a large part of their retirement money when the tech bubble burst because they were too heavily invested in tech stocks. I know of someone whose retirement portfolio dropped by 25% during the tech burst. On top of that he was given a retirement package soon after by his company (meaning they were letting him go so he could retire or be “let go”). He’s doing ok but he would be doing much better if the stock of the major corporation he worked for didn’t have a large decline so close to his retirement.
This illustrates the importance of diversifying your portfolio. Where are your investments? Make sure your retirement savings aren’t heavily tied to your company or any one sector. Don’t put all of your eggs in one basket!
Here are some great articles from others that further discuss diversification:
Reviewing Our Risk at My Wealth Builder
35 Common Sense Rules For Investing over at Moolanomy
True Diversification at brip blap
The Random Walk Guide to Investing: Ten Rules for Financial Success at Get Rich Slowly
13 Essential Rules for Investing at Life Optimizer
Employee Stock Options: You got to Knooooow When to Hold Them at Dough Roller
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{ 3 comments }
I like the pictures you use on your blog. Are you signed up with some service to get them?
That would be scary indeed. Which is why I prefer not being all in one stock. It’s ok for Gates, sort of, because he’s that type. Even so, I think he should diversify some. But that might scare people.
@ Mark - I get my pics from Flickr and I choose from Creative Commons photos.
@ Mrs Micah - Diversification is key. Gates will get by though…poor guy. He was knocked down to number three all for wanting to buy Yahoo.
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