Don't Bank 401(k) on Employer's Stock; If Company Hits Bad
USA Today (08/04/00) Vol. 2, No. 5 p.3B; Dugas, Christine

Millions of Americans habitually invest very large portions of their 401(k) assets in their employer's stock. However, very few financial planners would advise this investment strategy as being beneficial to one's portfolio. Even the best companies will most likely experience stock market turbulence. A sudden drop in company stock could be disastrous for employees close to retirement. Last March, for instance, Procter & Gamble took a 31 percent hit to its stock. As a result of this plunge, many employees watched their retirement funds fall just as fast as the market. Employees end up with large shares of company stock in 401(k) plans for a variety of reasons. A company's matching contributions, pre-set selling tenures, and the lure of high flying stock performance are just some reasons why employees allocate large chunks of their portfolio to one stock. Experts say that investors should allocate no more than 20 percent of a portfolio to one stock.

Back   | Home   |  News Archive