Net Gains: Sell Your Company Stock -- Now
Learn why it's a bad idea to own too much of your company's stock.
June 24, 2008 — -- 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.
