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Greetings and Salutations! First-timer on the boards here. I have several questions. I am a new employee of The Travelers Group, and I am currently considering my 401k options. I of course have several mutual fund options, but I would be interested in opinions regarding the degree of Foolishness involved in choosing to fund my 401k solely with company stock. I think this might be a good option because: it is Travelers stock, a strong Dow performer, good future, it has far, far outperformed the mutual fund options (34.75% annualized, last three years, we are told), and I can get it at a 5% discount. Other salient factors: there is no company match, and we can also buy stock through after-tax payroll deductions at a 10% discount, with brokerage fees waived. Also, since there is no company match, should I consider just building a Foolish Four portfolio within an IRA? I am married, so I could do the same for my wife, and sock away our first $4000 this way. I do intend to build a Foolish portfolio regardless of what I do with the 401k.
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No. of Recommendations: 0
Greetings and Salutations! First-timer on the boards here. I have several questions. I am a new
employee of The Travelers Group, and I am currently considering my 401k options. I of course
have several mutual fund options, but I would be interested in opinions regarding the degree of
Foolishness involved in choosing to fund my 401k solely with company stock. I think this might be a
good option because: it is Travelers stock, a strong Dow performer, good future, it has far, far
outperformed the mutual fund options (34.75% annualized, last three years, we are told), and I can
get it at a 5% discount. Other salient factors: there is no company match, and we can also buy
stock through after-tax payroll deductions at a 10% discount, with brokerage fees waived. Also,
since there is no company match, should I consider just building a Foolish Four portfolio within an
IRA? I am married, so I could do the same for my wife, and sock away our first $4000 this way. I
do intend to build a Foolish portfolio regardless of what I do with the 401k.


That's a question you'll have to answer for yourself. Are you comfortable with the level of diversification if your 401k is all in one stock? I would just note that a %5 discount and the waiver of brokerage fees can be considered "matching". It's money for nothing.
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>>.... I would be interested in opinions regarding the degree of Foolishness involved in choosing to fund my 401k solely with company stock.<<

I would hesitate to use a single stock, especially the stock of the company I worked for. You're greatly increasing your risk by doing this. If a downturn occurs, both your job and the stock value may be erased. Note, however, that after companies downsize, stock values may climb. I would have a hard time being grateful for that silver lining in the cloud after losing my job, though!

I might consider it (since you get a discounted price but no match) if I could sell the stock within the 401k in a reasonable amount of time. I don't know what restrictions are placed on selling but it might be acceptable to grab the discount, sell the stock, and reinvest the money in other ways. The difficulty is that you need to constantly attend to the portfolio by selling shares to avoid holding too much stock. This leads into market timing unless you have the discipline to always sell at a set interval regardless of price.

Definitely go after the IRA regardless of your final decision on the 401k.
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