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tonyl: I work for a company in the DJIA in which I can buy shares at 15% discount. I'm 25 years old and have been investing for a little over a year. Last year I invested about $7000 (which is almost my net worth) total in 401k, a couple individual stocks, and my company's stock.

I want to make sure I'm diversified and now I'm getting very heavy on the company I work for (they match 401k through company shares too).

Let me question your basic premise here. Diversification is not a bad thing. But it's also not a necessary thing. It is often taken as a given that "everybody should be diversified" and applied absolutely, across the board, without reflection and qualification.

It's been pointed out that Bill Gates and Warren Buffett didn't get where they are by diversifying. The thing to realize is that diversification is a great method to preserve wealth but concentration is the method to build wealth in the first place.

You are 25 years old. You've got at least several decades to do some building of wealth. You're working for a Dow Jones company, the very definition of blue ribbon. Yes, there's a risk in putting all your eggs in that one basket; even DJIA companies fall off the face of the financial earth. But diversification for the sheer sake of diversification isn't necessarily wise.

You are wise to be thinking about diversification; I'm simply suggesting that you be wise by thinking about it rather than just automatically doing it. The very reason that companies like yours enable ESPs and 401(k) plans with investments in company stock is to give you a stake in working harder to make it successful, so that you benefit from it even more. We have factory workers and secretaries retiring from my Fortune 50 employer as millionaires because they held onto their company stock. Those who diversified too quickly often lived to regret it.

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