Home | Finance | Financial Planning
Enron. That simple, seemingly-harmless corporate moniker can send shivers through the spine of even the most seasoned investor. After the collapse, employees with Enron-heavy 401(k) plans were left with nothing. But Enron was not unique in the fact that employees had large chunks of their 401(k) plan invested in the corporate stock of their employer. According to CNN and Money Magazine, Procter and Gamble employees have 94.65% of their 401(k) assets invested in company stock, much higher than the nearly 60% that Enron employees had. The problem doesn't affect just those who have company-heavy 401(k) plans. It's a problem that plagues individual investors as well. Perhaps you have a favorite company that you love, and you've gradually invested more and more in it, until it has reached an unhealthy amount. Like many other tragedies, what emerged from the disaster was a reality check for anyone who has too many of their nest eggs in one basket. And if you haven't done so recently, it may be time to check your portfolio's diversification. Most experts agree that you should never invest more than 30% of your assets in one single stock and not more than 15% of your 401(k) in your employer's stock. If you find yourself in that position, talk to a financial professional about how you can ease out of such a large commitment without giving a chunk back to Uncle Sam. Here are a few of the potential options available to you: Stagger your stock sales: It may seem like common sense, but by simply selling equal proportions of your stock over a period of several years, you reduce the amount of capital gains tax owed in one particular year. Consider gifting it: If you're feeling generous, you may consider gifting a certain amount of the stock to a child, grandchild or charity. Besides being a great gift, it helps you avoid paying capital gains taxes. Consider individual cost basis: By carefully selecting for sale the stocks in your portfolio with the highest cost basis, you can minimize the amount of capital gains tax you have to pay. When it comes to diversification plans, one size does not fit all. It's important that you talk to a financial professional to create a specific, individualized plan to carefully ease all of your nest eggs out of one basket. Diversification seeks to maximize the performance by spreading your investment dollars into various asset classes to add balance to your portfolio. However, using this methodology does not guarantee against the risk of loss in a declining market.
Information and Articles: http://www.mastersmba.com
Providing Information on various topics, please browse our other Articles for more informative resources, we house information on every topic imaginable so regardless of your needs you can be assured to find the answer here. If you wish to reprint this on your own website, simply click the "Web Version" in the right menu, and you are presented with a pre-formatted document to use.
A lot of the information is written by the Master Article team, and published exclusively on the MastersMBA.com website, and we do our best to research all information to ensure it's as accurate as possible. However at times we also publish documents given to us by other sources, we do examine these documents to ensure they are as accurate and correct as possible however at times they discuss highly specialized fields making it hard to authenticate the validity of every fact in the document. These are written by specialists in their respective fields, and we do trust their integrity and judgment however it's always a good idea when doing any research to consult a number of sources and form your own conclusion based on a number of view points.
Some of this weeks most popular categories are: Finance - Health - Business - Credit Loans and Acne
