Net Gains: Sell Your Company Stock -- Now

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More than 25,000 Gannett Co. employees learned two weeks ago they will begin receiving a higher matching contribution in company stock to their 401(k) accounts.

Sounds like good news, but I have one piece of advice for Gannett employees: Learn how to sell those shares.

That's not a judgment on the outlook of the publisher of USA Today and 84 other daily newspapers. Rather, it's a warning on the dangers of holding too much employer stock in your retirement account. First Enron and, more recently, Bear Stearns highlighted the risks of tying your retirement too closely to the fortunes of the company that employs you.

In less than 18 months, Bearn Stearns shares fell from $172 each to $10 at the time of its late May sale to J.P. Morgan Chase, leaving behind thousands of financially devastated workers.

The recent history of Gannett stock isn't quite that dismal, but its 40 percent price decline this year and a 10-year average annual total return of negative 8 percent is hardly the makings of a secure, comfortable retirement.

That's why workers should not let company stock dominate their 401(k) or other investment accounts. My advice would be to limit company stock to no more than 10 percent of your overall portfolio.

This advice applies whether you receive company shares through a 401(k), an employee stock purchase plan, an employee stock ownership plan or some other means. The advice is all the same.

By all means, make sure you contribute enough of your own pay to qualify for the full match from the company. There's no reason to turn down this "free money," but make sure it does not come to dominate your account.

The most important thing is to know when and how you can exchange company stock for shares in a broadly diversified mutual fund. Before the Enron collapse, many companies forced minimum holding periods on 401(k) stock contributions to discourage employee selling, but those restrictions are less common now.

This advice applies to employees at all companies, not just ones in a struggling industry such as newspapers.

For Gannett employees and other who receive company stock as a matching contribution, it means taking the initiative periodically to sell some of those shares and invest in another offering. Unsure how to do that? Contact the outfit that runs your company's 401(k) or visit its Web site, where such sales frequently can be initiated.

Since Enron, there has been a trend away from company 401(k) plans. Fewer companies use their own shares to match employee contributions, and employees as a whole hold less company stock than they once did, according to researchers.

The human resources consulting firm Hewitt Associates found 23 percent of companies it surveyed in 2007 offered only company stock as a 401(k) match. That was down from 35 percent the previous year.

But many workers still are overweight in company shares. A separate 2006 study by Hewitt Associates showed company stock remained the single largest holding in 401(k) accounts, amounting to 21.6 percent of the average balance.

The Employee Benefits Research Institute reported earlier this year that among those workers with a company-stock option, 7 percent held more than 90 percent of their 401(k) assets in company stock. Those 7 percent are risking financial implosion.

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