Comments on: Diversification and the 401(k) http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/ Sat, 20 Mar 2010 15:34:03 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: April 5, 2008 Link Payday | Uncommon Cents http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-16240 April 5, 2008 Link Payday | Uncommon Cents Sat, 05 Apr 2008 21:54:32 +0000 http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-16240 [...] finally, Mrs. Micah discusses how putting a lot of your money into your own company stock, even in a retirement plan, can be disastrou.... Think about diversification, but maybe more importantly, think of those Bear Stearns employees who [...] [...] finally, Mrs. Micah discusses how putting a lot of your money into your own company stock, even in a retirement plan, can be disastrou…. Think about diversification, but maybe more importantly, think of those Bear Stearns employees who [...]

]]> By: Dough Roller http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15822 Dough Roller Mon, 31 Mar 2008 13:38:18 +0000 http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15822 When I worked for a public company, I asked myself the following question: If I didn't work here, how much, if any, would I invest in the company? The answer was zero, so I didn't invest in the company. You should factor in incentives, such as with an ESPP, but on the whole most employees over-estimate what they think they know about the company. Either that, or they allow how they feel about their job dictate their investing decisions. Either way, it's a dangerous road to travel down, IMO. When I worked for a public company, I asked myself the following question: If I didn’t work here, how much, if any, would I invest in the company? The answer was zero, so I didn’t invest in the company. You should factor in incentives, such as with an ESPP, but on the whole most employees over-estimate what they think they know about the company. Either that, or they allow how they feel about their job dictate their investing decisions. Either way, it’s a dangerous road to travel down, IMO.

]]> By: Don’t Focus on Diversification — Twin Commas http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15661 Don’t Focus on Diversification — Twin Commas Sat, 29 Mar 2008 20:45:34 +0000 http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15661 [...] I read Mrs. Micah’s comments on Diversification, and decided to explain my own view here. Diversification can be a good thing, but I think too many [...] [...] I read Mrs. Micah’s comments on Diversification, and decided to explain my own view here. Diversification can be a good thing, but I think too many [...]

]]> By: Llama Money http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15634 Llama Money Sat, 29 Mar 2008 15:58:06 +0000 http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15634 My company is a private corporation, so there's no company stock to buy. If there was, I would pass. The only exception is if they offered an employee discount on stocks. For example, my wife's company offers a 15% discount off the current stock price. Once she becomes eligible, we will begin to pick up a small amount. Without a discount, I wouldn't be interested in "doubling up", like some people mentioned. My company is a private corporation, so there’s no company stock to buy. If there was, I would pass. The only exception is if they offered an employee discount on stocks. For example, my wife’s company offers a 15% discount off the current stock price. Once she becomes eligible, we will begin to pick up a small amount.

Without a discount, I wouldn’t be interested in “doubling up”, like some people mentioned.

]]> By: Required Reading - 03/29/2008 | Know The Ledge http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15609 Required Reading - 03/29/2008 | Know The Ledge Sat, 29 Mar 2008 11:04:33 +0000 http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15609 [...] planning has been on my mind lately as well, and I did enjoy the commentary from Mrs Micah on diversification and the 401(k). Mine is full of target funds so I don’t really think about it too much, and I’ve never [...] [...] planning has been on my mind lately as well, and I did enjoy the commentary from Mrs Micah on diversification and the 401(k). Mine is full of target funds so I don’t really think about it too much, and I’ve never [...]

]]> By: Julie http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15579 Julie Sat, 29 Mar 2008 00:46:24 +0000 http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15579 I agree with Brip Brap too, it would be bad enough to lose my job without losing a lot of my money. Look at the poor Bear Stearns employees!! I'm sure that they thought their company was strong - it's been around for more than 80 years. My employee stock plan is similar to Jon's dad's, but I'm still not sure if it's worth the risk (and my company has been around for almost 200 years). I agree with Brip Brap too, it would be bad enough to lose my job without losing a lot of my money. Look at the poor Bear Stearns employees!! I’m sure that they thought their company was strong – it’s been around for more than 80 years.

My employee stock plan is similar to Jon’s dad’s, but I’m still not sure if it’s worth the risk (and my company has been around for almost 200 years).

]]> By: Jon http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15563 Jon Fri, 28 Mar 2008 15:51:01 +0000 http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15563 I don't know if this is true for 401(k) matching contributions, but a lot of time sin an employee stock purchase plan you get a certain degree of built-in profit. For instance, my Dad's employer lets employees buy shares at the lowest market price over a certain time period, regardless of what the current market price is. So as soon as he buys, he's made some profit. Does anybody have any insight on how that works with a 401(k)? I'm also curious if the difference in market price has to be counted as income. Similar question... some types of companies, such as Canadian income royalty trusts, have an option to receive dividend payments in the form of new trust units. The cool part is the trust units are sold at a discount to the market price, usually 5%-10%. Again I'm curious whether the dividend income you report would be the market value of the new units or the price you paid for them. I don’t know if this is true for 401(k) matching contributions, but a lot of time sin an employee stock purchase plan you get a certain degree of built-in profit. For instance, my Dad’s employer lets employees buy shares at the lowest market price over a certain time period, regardless of what the current market price is. So as soon as he buys, he’s made some profit.

Does anybody have any insight on how that works with a 401(k)? I’m also curious if the difference in market price has to be counted as income.

Similar question… some types of companies, such as Canadian income royalty trusts, have an option to receive dividend payments in the form of new trust units. The cool part is the trust units are sold at a discount to the market price, usually 5%-10%. Again I’m curious whether the dividend income you report would be the market value of the new units or the price you paid for them.

]]> By: Dividend growth investor http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15562 Dividend growth investor Fri, 28 Mar 2008 15:46:06 +0000 http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15562 I do not hold company stock. The stock is already part of one of the major funds in which my 401K is invested. I have also heard the story of Enron, Worldcom, Adelphia, Bear Stearns employees who put everything in company stock.. I guess people never learn from their mistakes. I do not hold company stock. The stock is already part of one of the major funds in which my 401K is invested.
I have also heard the story of Enron, Worldcom, Adelphia, Bear Stearns employees who put everything in company stock.. I guess people never learn from their mistakes.

]]> By: Ryan S.@uncommon-cents.net http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15539 Ryan S.@uncommon-cents.net Fri, 28 Mar 2008 05:49:45 +0000 http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15539 Since I work for a non-profit, we don't have employer stock to invest in. If we did have employer stock to invest in, I'd limit it to at most 5% of my total portfolio. Right now, my retirement portfolio (which I track periodically at my blog) is 50% domestic stock market, 25% domestic bond, 25% international stock. Since I work for a non-profit, we don’t have employer stock to invest in. If we did have employer stock to invest in, I’d limit it to at most 5% of my total portfolio.

Right now, my retirement portfolio (which I track periodically at my blog) is 50% domestic stock market, 25% domestic bond, 25% international stock.

]]> By: Eli http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15533 Eli Fri, 28 Mar 2008 02:58:00 +0000 http://financefreelancelife.com/2008/03/27/how-do-you-diversify-your-401k/#comment-15533 Brip Blap - I agree with you. I don't invest in stock of the company I work for. You're right that company heads hide a lot from the SEC and Wall Street. Brip Blap – I agree with you. I don’t invest in stock of the company I work for. You’re right that company heads hide a lot from the SEC and Wall Street.

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