How to Diversify Your 401k With Company Stock

Video Transcript

"Hi everyone, this is Chris Markowski, President of Markowski Investments and host of the Watchdog on Wall Street radio show, here to talk about a very important topic. How to go about diversifying your 401k when you've got company stock in it. Many companies out there offer various different retirement plans, 401k's, where they give you the option of purchasing shares of the company you work for. And a lot of times you're allowed to purchase these stocks at actually below market prices. And when you get the stuff below market prices, you have to have a holding period, a restricted period before you can actually go about selling it. But I'm here to tell you even though I think that's a great thing to do, a lot of problems come out of this. Kind of harken back to Enron to some degree when we had thousands of employees of Enron with their entire retirement plans, their entire 401k's tied up in what? Enron stock. Guys, here's a newsflash there, even blue chips die. Yes, it's true. Blue chips die. You know I was looking this up one day. You know what the bluest of the blue chips was I think of all time? This is my opinion. Bluest of blue chips of all time was the first company to actually issue stock. That was the Dutch East India Corporation. It was around for over two hundred years, paid an eighteen percent annual dividend. Not too bad. But you know what? It's not here anymore. I don't care if you work for FedEx, I don't care if you work for UPS, if one thing, if we've learned one thing from this past year is that basically anybody can go out of business if they do the wrong thing. So make sure within your 401k plan you do not have more than ten percent allocated in company stock. And yes, you can continue buying it, getting that discount every single year, but make sure you're taking those profits off the table and constantly trimming your position. This is Chris Markowski, your watchdog on Wall Street."