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Ricks post:

It is their retirement money and they are perfectly capable of making their own decisions.

This would be an acceptable argument if it were true. The fact is the all qualified retirement plans like 401k's must be administer for the exclusive benefit of the participant AND beneficiaries. By allowing a participant to take undue and foolish risks, you are allowing the participant to put at risk assets that others have a potential claim. For example, in most states, half the assets belong to the participants spouse. I.e., 401k assets are not the exclusive property of the plan participant.

Then once again it is the responsibility of the participant AND beneficiaries to make sure they are taking risks that they find appropriate. My fiance and I - even though we are not yet married - have been reviewing every 6 months or so our 401k's for almost the last 2 years. If the beneficiary allows the participant to make all the decisions, then once again they have CHOSEN.

By the way Rick, since you are all for this ridiculous 20% rule, then please tell me how we, monitor, control and legislate it?

What happens if you buy a mutual fund/index fund offered in your 401k that happens to have say 5% of its equity in your company's stock? Does that mean you would have to sell an extra aggregate portion of your company's stock in your 401k, so as to not exceed the 20%? What happens then if the mutual fund/index fund sells all or some of their holdings in your company's stock. Can you then buy that aggregate amount back?

What happens if you buy only 20% of your company's stock and the rest in mutual funds. Then, over a 6 month period your company stock doubles in value while your mutual funds are flat. Are you then required to sell off a portion of your stock in the company and reinvest those proceeds in those languishing mutual funds in order to get back down to the 20% rule?

What if the market overreacts to news in my company's industry and clobbers my company along with the rest even though it is fiscally sound and later rebounds. I would not be able to move funds from say a crappy performing mutual fund in order to take advantage of that opportunity to buy extra stock at a low price?!? I would not be able to take advantage of a market driven opportunity because of some 20% rule.


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