NASD Warns Against Company Stock Concentration in 401(k)s

February 17, 2005 ( - NASD has issued an Investor Alert that warns workers against concentrating excessive amounts of company stock in their 401(k) plans.

The Alert entitled “Putting Too Much Stock In Your Company – A 401(k) Problem”, warns 401(k) participants that owning too much company stock can lead to a lack of diversification that could eventually see a huge fall in retirement savings value.

“For some people, a 401(k) plan is their only form of retirement savings,” said John Gannon, NASD Vice President for Investor Education, in a press release. “And they shouldn’t gamble their financial security in retirement on the success of just one stock.”

Citing studies by the Employee Benefits Research Institute (EBRI) and the Investment Company Institute (ICI), NASD notes that a large number of employees invest more than a quarter of their assets in only one company – their own. In one of the surveys, it was found that of those over 60, almost 25% hold more than half of their 401(k) value in company stock. The NASD says that a value of 10% to 20% of a 401(k) can safely be invested in company stock, but diversification mandates that the amount should not be much higher, according to a press release.

More information regarding saving for retirement is available at NASDs Smart 401(k) Investing learning center at .