TRUTH 7Company stock in 401(k)s

Many people are tempted to put the bulk of their 401(k) investments in their own company stock. Investment gurus are always telling people to invest in what they know, and who knows your own company better than you? Lower-level employees are constantly reading about higher-up company executives being rewarded with valuable stock options in the company. If the CEO believes strongly in the company, shouldn’t the workers?

Perhaps the most common reason people invest largely in their own company’s stock in their 401(k)s is that often a large portion of that money is free, where companies match with company stock the contributions of employees to their 401(k) accounts. According to a study by Hewitt Associates in 2006, ...

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