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The Collapse of Silicon Valley Bank

Updated: Aug 27, 2023

In case you missed it on Friday, Silicon Valley Bank (SIVB ) collapsed.

Family guy dad falling down stairs

Instead of writing about the who, what, and why of the failure, I’d rather focus on four lessons for the average investor:

  1. Diversify: Successfully choosing individual stocks is nearly impossible and having a heavy allocation to a single stock can ruin your wealth in one day. There is no better recent example than Silicon Valley Bank.

  2. Stock Compensation: If you are compensated with company stock, as I’m sure many of the ~9,000 employees of Silicon Valley Bank were, you need to continually evaluate your equity position. During my time in Fintech, I received quarterly shares of company stock and I always sold on the first available day at market open. This wasn’t easy psychologically, as there was always the hope of overnight riches, but I continually asked myself one question: “If the company handed me this money as cash, instead of shares, would I use it to purchase company stock?” The answer was always a resounding “No.”

  3. FDIC Insurance: It’s important to make sure that your emergency fund and any other “safe” assets are FDIC insured which will protect you up to $250,000 per depositor, per bank.

  4. Don’t Panic: Although Silicon Valley Bank was the first significant collapse of a financial institution since the Great Recession, it’s not the last! We’ve already seen Signature Bank and others struggling to survive. As an individual investor, the key is not to panic and sell which will lead to years, decades, or even a lifetime of regret.

Tobey Maquire Crying

In summary, diversify your portfolio, evaluate your stock based compensation, understand your FDIC insurance coverage, and don’t panic!

Disclaimer: The information in this post is provided for your convenience only and is not intended to be treated as financial, investment, tax, or other advice. The information is intended to be educational and is not tailored to the investment needs of any specific individual.  It is also not intended to be relied upon as a forecast and is not an offer or solicitation to buy or sell any securities or to adopt any investment strategy.  The opinions expressed are those of the author.  Reliance upon the guidance and information in this presentation is at the sole discretion of the individual.

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