Problem #5 – Investments (Company Stock)
Do you own stock in your own company? Companies have always encouraged employees to think like an owner. By owning stock, you are a part owner of your own company. There is nothing wrong with that idea, and if you work for a large company which issues stock, that may be an option available to you in your 401(k) plan.
But how much should you own? Not more than 5-10% of the company in your 401(k). There are just too many “Murphys” out there. http://www.murphys-laws.com/murphy/murphy-true.html
Mutual funds are much more recommended as a way to spread your money out so it can grow.
“Money, you should pardon the expression, is a little bit like manure. It doesn’t do any
good unless it’s spread around, encouraging young things to grow.” Barbra Streisand
One of the worst examples of company stock going sour in a 401(k) is Enron. Enron has been a running joke since 2002 for their collapse due to fraudulent business & accounting practices.
Many of their workers lost their life savings when Enron filed bankruptcy and their stock was rendered worthless. http://www.albionmonitor.com/0202a/enrontimeline.html
Enron’s 401(k) plan was enormous – over $1 Billion in total assets, of which $600 Million was in Enron stock – That is 60%! Enron offered a matching plan of up to 6% of an employee’s base pay – but paid the match in STOCK, not cash. When the stock plummeted from over $90 per share to less than a $1.00 in 16 months, their employees lost their life savings and any chance at retiring the way they had planned.
Please meet with your advisor if you have more than 10% of your 401(k) or portfolio in company stock. For more information, or to contact me, please visit http://www.helpmy401k.us. You can also follow me on Twitter at http://www.twitter.com/DeanVoelker