The theme this week on the Retirement Quick Tips Podcast is: Stupid Stock Market Predictions

If you glanced at today’s episode title, hopefully it gave you a little chuckle. Enron: America’s Most Innovative Company. 

Fortune magazine voted Enron “America’s Most Innovative Company” for six consecutive years, from 1996 to 2001. Yet, we all know that it was all just smoke & mirrors, because in that final year in 2001, everything blew up and Enron went from the most innovative company to the most legendary blowup and fraud. In August 2000, the stock was trading around $90 a share. Just over a year later, the stock was worthless. 

The saddest part of this fall from grace was that many Enron employees had the ability to buy Enron stock in their 401k, and most of them did. In fact, as reported by the New York Times, “At the end of the year 2000, the 401(k) plan had $2.1 billion in assets. More than half was invested in Enron company stock. Since then, the stock has lost 94 percent of its value.

At Portland General Electric, the Oregon utility acquired by Enron four years ago, some workers nearing retirement have lost hundreds of thousands of dollars. The utility has lined up grief counselors to help them work through their problems.”

I remember this all too well. I have clients who worked at Portland General Electirc and who themselves lost hundreds of thousands in Enron stock when it all blew up. It took many years and many lawsuits in order for Enron employees to recoup even just pennies on the dollar of what their 401ks were worth. 

The lesson here is that many people who work for large companies can trace much if not most of their wealth to the performance of the company stock, whether that be through the 401k, stock options, or restricted stock. Many employees of these large companies might have 50% or more of their net worth tied up in company stock. And if you were an Enron employee in the year 2000, you’d probably do the same…why wouldn’t you, since year after year, the company was thriving and had a bright future. Fortune doesn’t hand out the most innovative company award 6 years in a row for no good reason. 

But too many people ignore the risks of their concentrated stock. It’s essential that you diversify when you can and gradually reduce your exposure to any single stock, without letting your conviction or the reluctance to pay taxes cloud your good judgement.

Because even the most innovative company in the world can fizzle out to dust just like that…

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance