It was reported last Thursday that Fitch's Rating Service had given our economy an AA+ rating, quite possibly the highest ever received for an offshore jurisdiction and certainly for Bermuda itself.

Can it be a certainty that more insurers, captives, and other companies will roll in the biggest wave of start-ups yet?

If that happens, as it appears that it could, the competition for experienced qualified employees will increase. Incentives and inducements of all legal kinds will be offered to tempt some in the vernacular 'jump ship.'

Tempting indeed. A new company will often begin its life as a private company, funded by founders, venture capitalists, institutional investors, and other corporate/partnership structures with cash needing to be put to work.

It is, in a sense a closed structure, with all shares held by the starting group. It may remain in that format for a while until, it stabilises, and demonstrates its ability to be a 'going concern.' Such has been the fever pitch for private investors of all types, that these companies have been fully funded and revenue generating within weeks of inception.

Ambitious long-term plans, however, will include 'taking the company public' by launching an IPO (an initial public offering) on a major stock exchange, such as New York, London, etc. In this matter, everyone on board, including employees are offered the chance to participate in publicly owning these new companies shares.

What a heady ride that is for a successful company less than two years old, for instance, to take its place among the ranks of publicly traded corporations - it has happened here with frequently.

As the years roll by, long-term loyal employees willing to take a risk in starting (and staying) with brand new companies like these, and joined later by talented newcomers, have the opportunity to receive more incentive benefits such as company stock allocations and options. Commonly offered today, thousands of companies on a world wide basis offer complex benefits packages to their workforce.

Start-up companies have willingly used stock options and restricted shares as the future holy grail. Employees were willing to accept very high risks (and very low wages) in the hopes that their company might be the next Microsoft.

By now, most of us have read of the hundreds, maybe even, thousands of Microsoft employees who are now millionaires. But, always a crucial question, do they have real greenbacks in their hands, or just numbers on a net worth statement?

Because you see the thing of it is, what goes up, eventually may just go down, when we least expect it.

Rewarded along the way, in some cases, handsomely beyond wildest dreams, many employees loyal to these young companies have grown older. Their company awarded assets have grown exponentially, in some cases, the largest component of their retirement portfolio.

In the near future, they will be facing decisions on retiring, relocating, retooling, or re-engineering their professional careers into something perhaps less stressful, or the alternative, into more challenging and rewarding personal goals.

Once those kinds of changes are contemplated, a very thorough review of one's asset picture is imperative; restructuring may be necessary. You are not the same person you were then, and neither is your company.

Webster's online dictionary defines concentration as the spatial property of being crowded together, an increase in density. Interestingly, the opposite of concentration is particularly defining: dilution, dispersion, scattering, spread. Can we read diversification into this definition?

Clinging to the valuation hot air balloon - the higher it rises, the harder (and more dangerous) it is to let go. Or see it pop.

By now, you have probably guessed where I am going with this discourse. This is about concentration of risk in your company's stock, or any totally focused stock position, for that matter.

Writing about the rich again. Who cares about these people and their expensive problem? Readers, it is not just about their problem.

If you hold a concentrated position in stocks or any asset, the majority of which is dependent upon the performance of any specific industry, say tourism, or oil fluctuations, or local real estate, or insurance, or finances, or any of the major business machines in today's world, your portfolio is at a higher risk than one that is diversified across the asset classes and the world.

Why? Need I mention Enron again? How about Global Crossing or Worldcom? Alternatively, even the large fluctuations we have seen in asset values in the last month.

Add that to other accompanying risks, such as:

• Your job is always at risk in today's competitive environment; if you don't understand that and plan accordingly, you are not facing reality.

• If you have a spouse or another family member employed at the same firm, your risk is doubled;

• If you are planning to retire from your job, have a short options trading window and a lot of options to exercise, you are at risk of your options going underwater at the last moment, just when you need the most assets. The market is unforgiving, and waits for no man's plans.

• If you have more than 10-15% (absolute maximum tolerance) invested in one stock, you are at a higher risk, and

• If that concentrated stock position just happens to be the stock of company you work for, you are heading into pop-the-balloon territory.

TRAPS - The biggest risk to a portfolio is, believe it or not, the client's absolute refusal to look beyond his own operating sphere. Employees will cling to their company stock, feeling that stepping outside the box is well, almost unpopular.

They feel subliminal pressure to never sell.

In some documented historical cases, when they had the opportunity to reduce their concentrated positions, they did not do so. Somewhere along the line, the principles of asset diversification were left at home while tunnel vision may represent the status quo for others. Hard words - market do not always go up and stay up.

Traps and words of wisdom from these employees:

• "You don't understand, I know this company!" Really, then how did that fraud in another jurisdiction start - right at the top? The market value of your stock is down 50% right before you plan to retire.

• "I feel disloyal selling out." Then how come the senior executives always manage to sell their stock when they want to, and receive golden parachutes when they leave even when the company is floundering. It is OK for them?

• "My stock pays good dividends." So do lots of other companies and they are not related to your industry. What I understand that a company is only as good as its last dividend. Will your company stop paying dividends in a difficult year? Will your stock options go under water, just at the time you decide to make changes in your career?

Ownership of company stock by insiders and executives of publicly traded companies is regulated on proscribed schedules . They must declare on a regular basis what they are going to sell, and when, then they do it.

You should too, develop a schedule to routinely reallocate your holdings, particularly if you have option windows. Take the proceeds and diversify away from your concentrated positions.

It is never disloyal to engage in appropriate financial planning for your personal situation.

You will perform significantly better in your profession when you know that you have all contingencies covered. You will feel so much better (and so will I) that you will outperform for your next bonus.

Martha Harris Myron CPA CFP® is an internationally qualified investment advisor and dual citizen (US/ Bermuda). She is a Wealth Manager at Argus Financial Limited, specializing in investment advisory services and comprehensive financial solutions for private clients planning for the good life and career transitions. DirectLine: 294 5709 Confidential email can be directed to marthamyron@northrock.bm

The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.