How many times must this lesson be learned? Apparently there’s no limit when it comes to naïve and overconfident investors, which is to say that the need for tutoring is vast and unending. Sad and frustrating, but still true.
Two examples from today’s papers remind once more that diversification is too often ignored, assuming it’s recognized at all. Chalk it up to greed and fear, and perhaps ignorance of sound investment strategy. Good financial planning advice is widely available, but that doesn’t stop self-destructive behavior in finance, even in the center of the financial universe.
In today’s New York Times, for instance, a story about the fallout from the collapsing Lehman Brothers—a 157-year-old Wall Street investment bank—quotes a “rank and file employee” of the stressed company as it relates to the person’s investments. This former Lehman worker, who left the firm earlier this year, “lamented that he had put enough faith in the firm to retain shares — a decision he is paying for. ‘My children’s education fund is wiped out,’ said this person.”
One might imagine that working on Wall Street would provide some exposure to the lessons of sound portfolio strategy that have been honed over the last 50 years, but one can never assume when it comes to money.
Another sad item comes today via The Wall Street Journal, which relates the tale of a man who apparently invested all or at least most of his sons’ college money in Freddie Mac shares last week. The government has since taken over the battered mortgage institution and the shares have dropped sharply, leaving the investor’s college fund virtually wiped out.