small change toward a rich life

Double exposure: risks of working in the financial industry

If you have any money in the stock market right now, you’ve probably noticed a distressing trend over the past few months. I only check my retirement account balances once a month, and I can’t help being pained when the decline in net worth measures thousands of dollars.

Compounding this is the fact that, because I now work in the financial industry, the stock market also affects my income: my annual bonus is directly tied to the AUM held by my division of the company at the end of the year. When the stock market tanks like it is right now, the company loses millions of dollars in assets per month, and no amount of new sales can close the gap. It’s looking less and less likely that we will hit the magic number come 31 December. So in addition to my shrinking retirement accounts, I stand to lose thousands of dollars in income.

I happen to work for a bank that didn’t invest in sub-prime mortgages and is relatively unshaken by the ‘mortgage crisis’. But on days like today I think about all those poor people who work(ed) for Bear Stearns, or Freddie & Fannie, or IndyMac, or Washington Mutual, most of whom are in no way responsible for the mess we’re in. At least my base salary is relatively safe!

You may have heard warnings against keeping company stock in your 401(k) account or even investing too heavily in the same industry, because of the risk of double-exposure. Similarly, employment in the financial industry can expose your income to the same risks as your investments. It’s something that never occurred to me when I took this job, but it does bear considering.


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