NCPA - National Center for Policy Analysis

Employees Invest in Company Stock and Fail to Diversify

January 24, 2002

Employees at some of the nation's largest companies have put even more of their retirement savings in company stock than those at failed energy giant Enron Corp., reports the Washington Times.

  • At paint chain Sherwin-Williams, for instance, some 92 percent of all money in the 401(k) retirement plan is in company stock.
  • At Coke, the figure is about 81 percent; at pharmaceutical giant Pfizer Inc., the figure is more than 86 percent; and at McDonald's, it is 74 percent.
  • By contrast, Enron employees had invested 62 percent of their 401(k) assets in the company's stock as of the beginning of this year.

While some plans do not provide employees a choice other than to purchase company stock, Enron workers had 18 other investments to choose from. Some 43 percent of workers at the nation's largest employers pour their money into company stock voluntarily, according to a survey by the Profit Sharing/401k Council of America, which represents employers with 401(k) plans.

Financial advisers say diversifying investments - placing some savings into mutual funds and others in various companies' stock - is the most important move employees can make to protect their retirement savings.

Source: Kristina Stefanova, "Many Investors Focus On Stock Of Employer," Washington Times, January 24, 2002.


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