Sometimes, if you work for a large public company, you are given the opportunity to buy your company’s stock. If you believe your company is doing well and will do well in the future then you should buy some of their stock. This could be an especially good deal if the company sells it to employees at a discount or helps finance the purchase for you out of a payroll deduction. However, the general rules of portfolio investing apply here. Do not put more than 5% or 10% of your investment in your company’s stock. The rest of your savings should be in an S&P 500 Mutual fund.
Perhaps a cautionary tale that is relevant here is the Enron employee pension fund. Enron was an energy company headquartered in Houston, Texas. In the late 1990s it almost single-handedly deregulated energy markets through lobbying and reaped huge profits by buying and selling electricity and natural gas. However, it was fraudulently hiding losses that it was making in other diversified investments, and when that was discovered by the Wall Street Journal, its stock tanked. It declared bankruptcy in December 2001. Enron had encouraged its employees to invest their entire pension fund in Enron stock. Consequently, when Enron went bankrupt, not only did all the employees lose their jobs, but they also lost all their pension funds.