Investing Through Your Company: The Good, the Bad, and the Ugly

By Paula Santonocito

Unfortunately, if your company runs into financial difficulties, you can find yourself holding a nest without any eggs.

The collapse of energy giant Enron left many people in that position. Employees dependent on the company for income, savings, retirement, and those who owned a substantial amount of Enron stock, were left with nothing when the company went under.

Employees who worked for dot-com companies that went belly-up in the late 1990s had similar experiences.

What lesson can be learned from these extreme examples?

Although companies market their investment plans and programs, you should approach participation with a “buyer beware” mindset. Weigh your choices carefully—in the context of your life.

Are you heavily dependent on your employer for income? Is the company’s retirement plan essential to your long-term security? What happens if one or both suddenly weren’t available?

Owning stock in a company can prove rewarding. In addition to watching your investment grow with the company, you have the benefit of being a shareholder. In this role, you get to influence corporate direction by voting for board members, among other issues.

But what happens if your company goes through tough times? Enron is a worst case scenario, but many companies have seen their stock devalued in the current economic environment. Can you afford to wait for the stock to rebound? Equally important, do you have the wherewithal to handle financial turbulence?

Acquiring Information

Before investing through your company, or in it, take stock of the company—as well as your own situation. Do your research in order to assess risk. If necessary, seek the assistance of a financial expert.

Given today’s many investment choices, companies sometimes sponsor employee financial information sessions. If your employer offers such a session, attend it and have your questions ready. Financial advice is usually available through an Employee Assistance Program (EAP) as well. Membership organizations and community associations are also sources of investment seminars.

In addition, there are many books that can help you understand your investment choices.

Single-minded women should check out “Women & Money: Owning the Power to Control Your Own Destiny” by Suze Orman, which covers a wide range of financial topics.

Investing through or in your company can yield good–make that great–results. But the chance for bad or extremely ugly results also exists.

By assessing investment opportunities carefully, you will enter into decisions with a clear understanding of the potential outcome—and hopefully generate greater income.

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