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July 05, 2006


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I've always advised my clients against holding too much of their employers' stock in 401(k)s, ESOPs, ESPPs, etc. The interesting thing is that so many of the people I have worked with who acheived great wealth did exactly that.

I don't get stock in my plan but I would be VERY fearful of having that much in ANY stock. I see people's net worth graphs go up and down because of minute fluctuations in their employer's stock.

I think that it is quite possible to get rich on employer stock, but so few people work for a company for long enough, and few companies are stable enough, that they can bank on the stock and feel secure. Also I bet a lot of those people started working there when the company was much smaller and the price was a lot lower.

this article also talks about diversification and investing too much of your retirement assets in company stock

"In a survey of 458 firms conducted by Hewitt Associates, 83% of them said they did not place any restrictions on what percentage of their 401k retirement savings can employees invest in their company's stock. This therefore means the employees are taking on unlimited risk when investing in their company's stock."

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