Home Page
Employees and Company Stocks
Buying my own company's stocks - good or bad?
Company stock is an important business model for small time business just starting to get their feet wet in their set market or major corporate companies that invest millions and billions of dollars into stock. Stock can have a major influence on the sales, marketing, advertising, employee workforce and overall company reputation. Major corporations have fallen to the ground because of stock scandals, products failing therefore making their stocks fall, and just bad company stock management in general.
Something even more important than company stocks to company's themselves is company stock that employees have invested in. The Washington Post recently reported that the average 401(k) account has 42% of the money investing in the company’s stock. 3 out of 4 employees have more than 50% of their retirement account in their company’s stock. This has learned to be a very critical decision due to the swaying of recent company's stock in the length of a day. The highly publicized Enron scandal you think would have shown a lot of investors that investing in their own companies stock can be a not so good idea. Enron's stock was once hovering above 80$ per share and then when the bottom fell out it dropped to a few feeble pennies.
The general reason that employees keep falling for the idea that they should load up on their company's stock is that since they're within the company they think they will have a generally better idea of how the company is being ran, what products are being consumed, and it just brings a central family feel to them to know they're investing in something that they're part of and can help succeed.
Another lucrative reason investors invest in their own company stock is that a lot of times companies will match employee contributions with company stock. If the company matches your contributions with stock, then make sure your contributions are not in your company stock. It's very possible and easy to ask your company to support your out of business trades and return the investment in your 401k portfolio, or take it away as well. We can only hope that doesn't happen to you.
Treat your company stock as a gamble. You don’t want to put all your money into it, no more than 10% and if you were investing in other individual stocks outside of your retirement plan, then it would be wise to lower it even more. Take advantage of the mutual funds your company has selected for your retirement plan. Diversification is the name of the game.