Limit company stock
Remember Enron? You already count on your employer for your paycheck -- don't count on it for your portfolio gains as well. We tell you the acceptable amount.
(MONEY Magazine) -- You may have full confidence in your company's future, but when it comes to your 401(k) strategy, nothing can trip you up more than blind loyalty.
Never put more than 10% of your money in your employer's stock. After all, your job security already depends on your firm's financial health.
If you load your 401(k) with your company stock, you are wagering your retirement security on your employer as well.
Yes, if the stock soars, you'll do better than if you had spread your money around. But the risk isn't worth it.
The most recent dramatic example of just how serious this risk can be is Enron, which imploded after its executives allegedly engaged in various acts of malfeasance.
But corporate shenanigans aren't the only reason a company's stock might take a major hit. A company with perfectly honest management might fall on hard times because the management is incompetent, or, if competent, perhaps the victim of economic forces over which the managers have no control, say, an influx of cheaper products from abroad.
Or maybe the big product the company was counting on to grow earnings generates disappointing sales.
Fact is, American corporate history is bursting with examples of companies that once strode the economic landscape like a Colossus that later found themselves struggling for their very existence. Just look at Ford and GM.
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