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Don’t hold a bunch of your employer’s stock!

In my book, I recommend not holding onto the stock of your own employer. Instead, the best strategy is “buy and hold index funds.” Those are diversified funds that have a little bit of each of wide variety of companies.

If you hold the stock of your employer, you’re taking a double chance. First, you’re taking the risk that a single stock will decline. But second, you’re taking the risk that when your company’s fortunes decline, you lose big in the stock market and lose from job-related effects.

Some employers will match your purchases of their stock. Fine. Find out the time limits and, as soon as you’re permitted, diversify out of your own employer’s stock.

There are many tales of woe from people at Enron, Merrill Lynch, Lehman Brothers and AIG that all made the same mistake — holding their own employer’s stock in large amounts. Don’t make the same mistake.

Sensible advice about bank runs

The best advice about standing in line to get your money out of a shaky bank is:

Don’t.

There’s very little to be gained by spending a day standing in line. Remember, we have federal deposit insurance that will guarantee your deposit up to $100,000. So, just keep that deposit where it is, in the shaky bank, and continue to write checks on it as usual.

But what if you just absolutely have to get that money out? Consider the fact that if you take the money out in cash, it will then be vulnerable to loss and theft — both far bigger dangers than bank collapse.

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The “Rodney Dangerfield” economy

Comedian Rodney Dangerfield used to lament, “I get no respect.” The U.S. economy, which now appears finally headed for a recession after years of growth, also gets little respect. This article from Social Education provides some reasons why. Of primary interest to this site’s visitors: The article explains how the “hedonic treadmill” can keep people from feeling good even as their material standard of living increases:

The image [of the hedonic treadmill] is that of someone who must run faster just to stay in the same place. The reasoning is that people seem to judge their well-being not by their own standard of living, but by how it compares with some reference level. The reference level could be set by neighbors’ standard of living or an economy-wide average. In either case, evenly distributed growth would leave everyone in the same place relative to the reference group, having a higher standard of living but no greater happiness.

The news isn’t all bad. We have the ability to get off the hedonic treadmill by setting our own standards for what we’ll consider prosperous. What better time than now to get off the hedonic treadmill?