AS MY PERSONAL and financial life gradually became more orderly in the months after my husband’s death, I found myself wrestling with one particular investment: My late husband had spent the bulk of his working life with Union Pacific and, like longtime employees at so many companies, he’d accumulated a significant number of shares. What should I do with those shares?
My husband and I occasionally discussed the dangers of overweighting company stock—something that often happens when shares are used for the employer’s 401(k) matching contribution or they’re granted as part of incentive pay packages. Over the years, he funneled less money into company stock and instead invested in broadly diversified index funds.
Still, whenever Union Pacific paid a dividend, he’d reinvest the money in the stock. That meant his holdings kept growing. At the time of his death, his portfolio was substantially unbalanced.
Now that he’s gone, the things that were his are all I have left, along with the memories and shared experiences that those objects evoke. For me, this element of his life’s savings has become something more than simply a portion of his compensation that resulted in an unbalanced portfolio.
On the other hand, when I look at our combined assets that I now manage for my own ends, this holding seems excessive. I considered reducing it substantially and replacing it with a total market index fund. But for the moment, I’ve decided to hold onto all of the shares. Wholly rational financial decisions do not come easy. But despite my sentimentality, I’m comfortable that this choice makes sense, even if it’s imperfect, for five reasons.
First, the quarterly dividend is solid. Union Pacific has paid dividends for 120 years. This creates another long-term income stream to meet my everyday expenses, build up my cash reserve and divert into a total market index fund. My three teenagers and I are living the widow-and-orphan life and, yes, this stock has earned the “widows and orphans” moniker.
Second, over the years, I learned a lot about the company, its business and its competition, and I continue to watch this sector of the economy. I won’t accidentally forget to pay attention. Should my expectations of its long-term value prove wrong, I will need to—and want to—sell.
Third, I like the idea of continuing to grow my total worth for as long as I can. I hope to see the overweight issue resolve itself, as I add to other assets.
Fourth, I need to consider possible capital gains taxes. I don’t plan to use this money for a while, so I prefer to have the whole of it working for me, without losing a nickel to the taxman.
Finally, I find comfort in the ongoing connection to my husband’s company, and to the memories of the many good times we enjoyed with friends and colleagues through the years.
What lessons should you take away from all of this? Here are four:
Catherine Horiuchi recently retired from the University of San Francisco’s School of Management, where she was an associate professor teaching graduate courses in public policy, public finance and government technology. Catherine’s earlier articles include From Two to One, Missing a Step and Thanks, Younger Self.