401(k) losses? Get your money back

Don't let the market meltdown derail your future. Follow our six-step guide to rebuilding your 401(k).

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4. Get wise about company stock
Get wise about company stock
For years financial advisers have wondered what it would take to convince starry-eyed workers that company stock is a dangerous investment. Maybe it will be this financial crisis, which is bringing corporation after corporation to its knees: Bear Stearns, Lehman Brothers and Merrill Lynch, to name a few.

So wake up - bad things can happen to good companies, even yours. And if they do, you face a double whammy, since you could lose your job and your nest egg at the same time. Do not, repeat do not, invest more than 10% of your portfolio in your company's stock. Better yet, hold zero.

Fortunately, workers have been slowly backing away from their employer's shares. Pension reforms passed in 2006 eased restrictions on selling company stock, allowing workers with three years of service to do so. Just 58% of 401(k) participants now hold company stock vs. 64% in 2003, a 2007 Fidelity study found.

But too many employees are still overdosing on the stuff. Vanguard reports that a third of eligible workers have 20% or more of their 401(k) in their employer's shares. And older employees, who have the most to lose, are the worst offenders: 43% of workers over age 60 have more than 20% of their 401(k) assets in company shares vs. just 28% of those under age 30.

So start trimming those shares if you haven't already.

NEXT: Keep your costs low
Last updated December 15 2008: 8:38 AM ET
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