Inherited StocksYou would be surprised by the number of individuals I have helped over the years who hold a very large position in a single stock. I’m not talking about corporate executives who received compensation in stock and work for years to diversify it. I’m talking about families who invested in their local company and believed in it so much they never wanted to sell. These are the lucky families who picked the right company. Others made the same bet and didn’t end up rich.
My job is to help separate the sentimental value these investments have from the risk they pose to financial security. I don’t care what the company is. Holding too much of a single stock is risky. Ten years ago, nobody was predicting that General Electric (GE) would fall on such hard times. It was a solid blue-chip company…or so it seemed.
I do care about the emotional attachment. I’m not opposed to keeping some of the stock because it was your father’s favorite. Just make sure it’s not so much that a big drop in its price will change your life.
If you ever find yourself in the lucky position where you inherit a bunch of money in a single stock, diversify it. You may get rich by taking concentrated risk. You stay rich by diversifying that risk.