company stock

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amplifier
Posts: 67
Joined: Wed Dec 03, 2008 11:12 pm

company stock

Post by amplifier » Sun Mar 02, 2014 5:28 pm

I'm convinced that owning stock in the company you work for is a risk. Because of this, I have reduced the amount of stock in the company I work for.

This year, my company began directing half of the company's 401k match into a company stock fund for all 401k participants. (My company has over 100k employees, the average annual return for the stock has been 17% over the last 5 years, I have worked there 10 years, and I expect do so another 10 years.)

The company match has always been 100% of the first 6% contributed, and that has not changed; but going forward, half of this match will be directed to my investment choices, and the other half to the company stock fund. This fund does not correspond directly to the value of actual shares in my company's stock, since it also contains some cash and short-term investments for expenses, trading gains and losses. The expense ratio is apparently 2.5 basis points.

I'm unsure what to do here. I am fully vested in all matching contributions, and am able to transfer them to other investments. I am not thrilled about regularly needing to rebalance out of this investment, since I try to fidget with my portfolio as little as necessary. I have considered merely increasing my contributions to fixed income to offset some of the increased risk.

May I ask the folks on the forum what they think about this situation and thoughts on how to handle it? My concern is increased leverage/risk to my company, but not wanting to begin trading within my 401k regularly to offset it.

deikel
Posts: 449
Joined: Sat Jan 25, 2014 7:13 pm

Re: company stock

Post by deikel » Sun Mar 02, 2014 5:37 pm

I would bite the bullet and rebalance twice yearly - its kind of odd to force you into company stock, but I guess the high expense ratio explains the motivation behind it...

+1 on seperating job from assets
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archbish99
Posts: 1611
Joined: Fri Jun 10, 2011 6:02 pm

Re: company stock

Post by archbish99 » Sun Mar 02, 2014 7:06 pm

It's still worth investing in your 401k, so keep doing it. Just be happy they allow you to transfer out of that fund. Look on the positive side -- it gives you ready funds to rebalance from. Just stick them into whichever real asset class is underweight in the rest of your portfolio.
I'm not a financial advisor, I just play one on the Internet.

dbr
Posts: 24853
Joined: Sun Mar 04, 2007 9:50 am

Re: company stock

Post by dbr » Sun Mar 02, 2014 8:02 pm

amplifier wrote:
I'm unsure what to do here. I am fully vested in all matching contributions, and am able to transfer them to other investments. I am not thrilled about regularly needing to rebalance out of this investment, since I try to fidget with my portfolio as little as necessary. I have considered merely increasing my contributions to fixed income to offset some of the increased risk.


It's common. Just rebalance out of the investment as often as seems practical. Offsetting the single stock risk by adding bonds is not sound investing.

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