[sebastianbk]

I just sold all of my Microsoft stock two days ago and now I come across this article. Avesh is absolutely right about the points he is making and I think that everybody who are entitled to stocks as a part of their payment package should sell these immediately and construct a more balanced portfolio instead.

If you (like myself) feel like you are better at writing software than acting like a wolf on Wall Street you should take a look at index funds. An index fund is a fund that reflects the development of an index (e.g., S&P 500 or FTSE 100). Rather than paying a portfolio manager a high fee (of up to 5% of the invested portfolio) to actively manage your investments, an index fund is designed so that it simply follows an index. This is much cheaper than actively managing the portfolio. Since John Bogle came up with the idea about 40 years ago and founded The Vanguard Group, history has proven time and time again that active investors can't beat the market in the long run. Index funds therefore yield a higher net return because of their lower costs (typically around 0.5%).

If you are new to investing, I would suggest to go with the three-fund portfolio[1]. Divide your portfolio into three parts and invest in a domestic stock market index fund, an international stock market index fund and a domestic bond index fund. This would probably yield an annual return of 10-15% with a very controlled level of risk. I have constructed my portfolio like this and I am really happy about it. I don't have to constantly worry about my investments and at the same time I can expect a fairly solid rate of return.

[1]: http://www.bogleheads.org/wiki/Three-fund_portfolio