Investors who watched employees of Enron and Bear Stearns lose their retirement savings as their respective firms collapsed learned a lesson. According to the Employee Benefit Research Institute, 401(k) participants continue to diversify away from their company stock, a trend that began in 1999. Under regulations that recently went into effect, most 401(k) plans must permit plan participants to sell company stock and reinvest the assets at least on a quarterly basis, though many plans allow more frequent trades.
"When your livelihood and your investments are with the same company or industry, you could end up putting your financial future at risk," Place says. "If the industry starts to decline, your job might be on the line, so you could lose your investments and your job at the same time."
Place says putting the bulk of your money in your company's stock is bad investment planning and almost always turns out badly.
"I have one client that I can think of in my career that is heavily invested in his own company's stock that hasn't blown up his account," she says. "All the rest of them have had something happen, like the dot-com bubble or something else. At least that client also had a lot invested in other things."