The Dean of Diversity

History is rife with poor fools who put all their eggs in one basket. And then the basket exploded, fell off a cliff, and was run over by a Mack truck.

Former employees of Enron, the defunct Texas energy company, lost much of their life savings because they loved their company so much that they bought only Enron stock to fund their retirement. This is stupid.

First, as we know, Enron's spectacular profits were proven to be entirely fabricated. For more read here: http://www.nytimes.com/2002/01/20/business/20WORK.html?pagewanted=1

And secondly, no one should ever, ever rely solely upon his or her company for support and stability. Businesses have one organizing principle, and it is not "Look out for employees at all costs." It is "Maximize profits".

More recently, we learned that Bernie Madoff took all the trust and loyalty folks handed to him, along with their millions of dollars, and stomped on all three of these things. He operated a pyramid scheme. Simply put, a pyramid scheme does not thrive by growing the value of its existing assets. The operator of a pyramid scheme thrives by convincing more and more people to make investments in the scheme; he then pays this newly-acquired money to the earlier investors, while lying that the value of the existing assets has grown. Repeat. For more, read here: http://online.wsj.com/article/SB124604151653862301.html

So how did all these rich, supposedly sophisticated investors get taken? In part, because their greediness allowed them to believe that a stock/bond investment account could credibly return 10 to 12 percent each and every year, even in down years. If the manager of the investment fund is on the level, this is highly unlikely.

The lesson is: find several places to put your money. Fortunately, there's no shortage of these.