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Yachtsman will post answers to common
investment and retirement questions sent to Yacht@YachtsmanInvesting.com or to YachtRetirement@aol.com and provide specific information on investing issues, retirement concerns and questions and financial
planning and services.
I will display frequently asked questions from readers by initials
only regarding investing, retirement, finance, financial planning, fixed-income, diversification or whatever financial
questions you would like to ask.
So ask anything on your mind and remember, there are no dumb questions. If
you are asking it, someone else is thinking it. So go ahead and ask.
Please check back frequently
for updates.
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Hi Yachtsman; I
want to thank you for all you do with this wonderful web site. I really appreciate your help. My question is I work for a
Fortune 500 company and have over 90% of my 401(k) in the stock of my company. I receive matching contributions
and I'm concerned I'm not properly diversified. I have most of my entire retirement tied up in my company stock.
What do you think? Thank you for all your help and all you do for us.
C.G
Thank you for the kind comments.
You are absolutely right to be very concerned about your lack of diversification. Even though you work for a well known and
well capitalized company, the reminder I give to people in your enviable position is Enron. The top energy company of its
time that turned out to be a house of cards. I have no doubt your fine compnay is a stalwart of corporate America. However,
my Discipline is to never have more than 25% of any portfolio in any one investment. Regardless of its standing, capitalization
or the benefit you receive from its matching contribution to your 401(k), placing more than 25% in any one single investment
places you at risk for a significant loss. And risk vs. reward is the cornerstone of Yachtsman investing. You need to diversify
your overall portfolio holdings. Over the next year you should prudently diversify while continuing to take advantage
of your company's matching contributions. Follow along with Yachtsman Investing and learn how to diversify your holdings
among different types of equities and asset classes.
And congratulations on your investment
Disciplines. You're on the road to a comfortable retirement. Yacht
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Yacht I am 27 years old and have saved a little
over $4800 I would like to invest. Do you suggest I buy individual stocks or a mutual fund? I'm self employed and
have no 401(k) or other company benefits. How do you suggest I invest this money? Thank you. K.F. First,
I'd like to congratulate you on starting your savings plan. That is always the most difficult step and committing to an
investment plan is the best place to start. From the minimal information you provided I can only generalize, but
I would begin by making certain you have paid off all credit card debt. I would also encourage you to reduce or even hopefully,
eliminating any auto credit debt as it is also non-deductible. The next step would be for you to focus, if you have not already
done so, on home ownership. The interest portion of your mortgage payment remains one of the very few tax deductions
remaining under today's tax code As you are self-employed, you should also take advantage of the
other main tax deduction available today and that would be a Roth IRA. Please review the details of the Individual Retirement
Account under the Benefits section here on YRI and follow the links I have provided for additional information. As
a general rule, I would encourage an individual with less than $5000 in total to invest to begin with a mutual fund.
This will allow you the diversification that would be difficult for you to achieve with limited positions. You could then
work on developing your investment skills and developing your investment style by "paper trading" a fully diversified
portfolio of stocks until your investment capital reaches a level that allows you to create an actual diversified portfolio I would recommend you dollar cost average into a diversified mutual fund over time instead of trying to time
the market by investing your capital all at one level. This is much the same approach I use of buying in stages at different
levels as I build a position in an equity or other position. At your age you have the ultimate investment luxury:
time. You can use this luxury to your advantage by continuing your investment plan, expanding your investment knowledge and
honing your investment skills. Again, congratulations on beginning your investment plan and please keep us
posted as to your investing progress. Yacht
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