Hi,I'm new to the discussion boards, and somewhat new to the Fool community. I say somewhat because I actually have been slightly tuned to Fool since the dot com boom days (if only I would have followed their advice back then). Anyway I am now signed up for 3 newsletters (SA, HG, and DRIP) and started getting more involved by reading all their training and newsletters and making decisions accordingly (it is actually exciting when you are making informed decisions and know you are doing the right thing - I was excited to buy netflix when they dropped by 4+ bucks the other week).OK after my longwinded introduction here is my question.I've been diligently building my 401k for years and as an employee of the firm can actually put money into the company stock (i know I know I hear the enron echo here, but I think BAC has a fairly good track record).My question is - although one should be careful how much they invest in the company they work for, since the only other choices I have are mutual funds (which I dont like - actually almost despise) how much should I invest into BAC within my 401k into BAC as an employee?My total 401k holdings for may age I think is significant (close to 175k and in my low 30's) I also have about 25k in other long term holdings.At my age I am willing to tolerate a significant amount of risk (i thought that would help)thank you so much and sorry for the long message.
I see no reason to have more than 25% of my stock portfolio in any one stock, any investment can go bad. I see no reason to have more than 15% - 20% of my net worth in any one stock.
"My question is - although one should be careful how much they invest in the company they work for, since the only other choices I have are mutual funds (which I dont like - actually almost despise) how much should I invest into BAC within my 401k into BAC as an employee?My total 401k holdings for may age I think is significant (close to 175k and in my low 30's) I also have about 25k in other long term holdings.At my age I am willing to tolerate a significant amount of risk (i thought that "Advise for one who is past 83. Life goes on beyond retirement age for some of us anyway. To be sure you have enough to spend at that time enjoyably you will need money. So to make sure that you have plenty of it available be sure and put as much as you can afford away for that future. A suggestion since you are obviously receiving ~ $1800+ a quarter in dividends from BAC, suggest this money be used to reinvest in BAC. New money should be invested elsewhere. If it is a tax advantage to invest in 401K then look into the mutual funds and be sure if you do invest there that the fund is not heavy weighted in Financial's. Otherwise JNJ, VLO, OTTR might fit into your long range program. I assume the $25k is in Hidden Gems. If not look there for more help. JIM
My question is - although one should be careful how much they invest in the company they work for, since the only other choices I have are mutual funds (which I dont like - actually almost despise) how much should I invest into BAC within my 401k into BAC as an employee?There is no magic number as to how high a percentage you hold in your employers stock. For me I don't go higher than 10%. Any further puts you at risk for several reasons including lack of diversification and the old double whammy like those in the .com era. Your employer may experience significant problems and hurt your stock investment in it, and the company can give employees the old heave ho... As a Nortel former Nortel employee I'm glad I stuck to that rule long before the stock collapsed in 2001.If you have stock options in a company you are employed by, use these as a hedge and avoid buying the stock altogether. The options would protect you if the stock goes up and if it goes down (so long as you haven't exercised). In addition sell the stock if you exercise!!! Another lesson some people have learned.-canamHowever BAC is not a bubble tech company!!!
However BAC is not a bubble tech company!!!-------------------------------------------------------------------I'm glad you point that out... I think BAC is one of the safest companies you could possibly be investing in for 401K, and if the shares are DRIPed, a whole spanking lot of money could be made in the 30 or so years to retirement. You start looking for an exit point when you get close to 60, not worry about the stock price in your 30s.
I still think you may be over-allocating if you get 100% of your income from BAC and also invest a significant portion of your retirement portfolio into BAC. I agree it's a safe investment for retirement, but if for some unforseen reason it blows up, you're out of a job and a significant portion of your retirement savings at the same time.
I agree with this last point (if your employer hits the skids the double-whammy of losing your job and a core portion of your investment portfolio can be tough to recover from - even if you're relatively young).All that said, I have approximately zero concern that BAC, which operates in a regulated industry, is the next Enron. I've advocated BAC stock to my retired Mom in the past, and continue to advocate that she hold it. More recently, I became a shareholder via my KRB holdings.But I also wanted to mention that DRiP programs require monitoring too. For just about every success story about AT&T, there's another story of DRiPing into Eastman Kodak, or the like. It doesn't matter the investment vehicle. No investment should be 100% buy and ignore unless it truly is zero risk. And there are *no* stocks that fall into that category. That doesn't mean you have to follow hourly, daily, or weekly price fluctuations obsessively. But you really shouldn't ignore a holding for years at a time. Maybe pick a day - two days after your birthday? - and that's the day you'll review all your holdings every year to see if they still truly make sense for you to own.I hope that BAC continues to be a good employer (for you) and a good stock to own (for all of us). Given its stability and high (and growing) dividend, I think this may be one of the last stocks I will still own when I'm deep into retirement many years from now. But that's what I think today, and I will review it periodically.Best wishes,DB Bob (long BAC and so are other family members)Peace on Earth
Your Enron echo should speak to you. There are lots of things that can harm a company. ie, a scandal, a plane crash involving a key exec, a car crash involving a key exec, a plane crash involving the exec HQ building, a bomb, a very nasty economic twist that crashes the entire industry, or just plain lousy luck. One of the only things worse than losing your job unexpectedly is losing your entire 401K unepectedly on the same day you lost your job unexpectedly.Isn't there one worthy fund?I have cash invested in BAC, but I don't work there. Two eggs, two baskets...
One of the only things worse than losing your job unexpectedly is losing your entire 401K unepectedly on the same day you lost your job unexpectedly.As someone who job hopped most of my career.....I have a number of rollover accounts from 401k and 403b that are invested in "safe" funds. I do have one IRA that is self-directed and a number of individually held stocks. Lots of eggs in many baskets.WF
Look for an index fund. I would advise against putting more than 33% of your contributions into your companies stock.Plus remember you can not vote for the shares in your 401k.HRSE
Hi there, I originally posted the question and cannot log in on a daily basis but I had a chance to review all the posts and would like to respond.First of all thank you all for taking the time to read my post and for those of you who also replied. I've found all of you to be helpful in putting clarity into my specific situation and hope it provided some insight into others as well.I'll recap some of the responses here to keep it all in 1 post.Out of the 200,000 I have in logn term/retirement savings I have 35,000 allocated in BAC across 401k, pension plans (you can select where to invest) and taxable accounts (from a stock option exercise). As well the 25,000 I mentioned are in old drip accounts I have and a rollover ira from a previous job.I agree and feel as well with most of the sentiments about not putting all your eggs in one basket, I think 34k out of 200k is less than 20% of holdings and I only add a portion of my monthly 401k witholdings for BAC (so it should grow significantly larger than that).jtofabc - good point on the dividends something I didnt account for (shame on me being an old Drip fan). Yes I did already move 50% of the 25k to HG and SA recommendations. I am struggling with the other 50% that are in old Drips (I am battling the 'i can never sell' syndrome). Some of my larger portions in Drips are HD, WTR, KSE.Canam - I agree very much with the last statement about BAC not being a tech bubble, obviously they are very very diversified in their business streams.Dave - your sentiments is what I feel and promted my questionBancheta - strong point about job and savings all together. I am looking into other options. If those pan out I will keep a strong holding in BAC positions because I still belive they are solid and long term holders.dbBob - They have been a very good employer and they are actually a great company to work for. My career advanced tremendously here.Once again thanks for the time and the guidance many of you offered as well as a great response and dialogue for my first MF post.I look forward to staying engaged and in touch.yzu
Some of my larger portions in Drips are HD, WTR, KSE.As to this portion of your portfolio...KSE will be moot once the takeover happens....it is a cash deal and you will get a check. I'm holding WTR for the long term (another 10+ years) and Since I don't own HD I looked at the cyrstal ball (3 sources) and think that is a long term hold as well.I do hold BAC and am currently contracted out to WFC, which I started buying....both are strong competitors, diversified, and in it for the long haul. Perhaps buy the competition?WF *hope this helps*
Some of my larger portions in Drips are HD, WTR, KSE.Suggest you look into how Nardelli seems to be milking HD. Excessive pay, bonuses, and stock options while company goes no where earnings wise as well as stock price. Even CALPERS is challenging these excess and their governance. My suggestion sell HD and buy JNJ and continue it as a DRIP.
Thanks very much.HD, i've picked up over a few years and then stopped when my holdings were getting too large for the strategy I was using then.As I mentioned out of the 25k in not 401k, 50% is in an old ira rollover and I now own only Fool suggestions (AMZN, FUN, IIVI, NFLX, NVT) and I am happy with them.The other 50% is in Drips I started 6-7 years ago and stopped adding as of 3 years ago (at that time I was eligible to put more funds into a special 401k - they call it a 401k restoration plan and it allows you to add more than the traditional allowances)HD my largest holding is about $6000 I thought of selling after the recent shareholders meeting, but see signs of potential there and therefore I am holding on for longer results.KSE about $1800, I missed that whole sale notice, but I am fine with moving on.WTR about $1500 - I actually love this play and really like the way the management communicates in their letter with the div reinvestment mailingsSome other holdings are:VZ - $1700HNZ - $1100C - $2200 (there you have some financial diversification)HSE - $600XOM - $1000STA - $400MO - $500MSFT - $1800Anyway, thanks again I am learning from all the responses.yzu
Funny you say that.When I began my HD drip in 2000, it was between HD and JNJ. I think my results would have been better with JNJ.I do look at the bright side, I forced myself to save and now have that 5500 saved. But I am learning now how to value the decision making process now.thanks
yzu,After KSE sells (at $42 IIRC) later this year, I'll be putting it into another Utility (don't know which at this point probably DUK). In your case you may consider spreading between WTR, VZ and MO. I hold all three with around 18% of my stock holdings in WTR. With the constant splits and increased dividends I now have over 1000 shares at a basis of around $12 per. MO is looking to spin off companies later this year or early next. VZ is the force to be watched in the east for wireline, cell, soon TV (taking on Cable). WF
thank you, extremely helpful there, especially coming from someone who has some of my similar holdings, I will be looking into following your idea.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |