Wall Streeters Lose $2B in 401(k) Bet on Own Firms

Excelsior!

notadmin, don't agree.
401k funds are basically sector choices for the long term and not trading vehicles. Employees merely pick an allocation and forget about it, making minor re balancing decisions. But the head-line sounds good.

This board is full of trolls.

Employees of public companies are always going to allocate capital to their company in their 401k. This will happen whether they are finance employees or not, since they are incentivized to do so by the company itself. (For instance, the employee may get stock at a discount to market price, or the company may pay the 401k match with company stock.)

Nothing to see here...

PS The 401k losses pale in comparison to the deferred comp losses.

> This board is full of trolls.

Recently a lot of otherwise inactive accounts that were created some time back have begun posting with great regularity. Str33teasier is one example whereas posters like midtownereast don't post much anymore.

"usq This board is full of trolls."

WRONG. READ the ACTUAL ARTICLE and see what it ACTUALLY SAYS. The banks do the OPPOSITE of what you say, espeically GS.

Huh? Less rage and more English, please.

"Huh? Less rage and more English, please."

There was nothing grammatically incorrect about what I said above. You need to actually READ the article, where you will see that most of the banks go out of their way to NOT have their employees tied up in their own stock. They all give them the option of selling and diversifying right away, or never having the stock at all. And they mention why in the article. Which you did in fact seem to read.

"Employees of public companies are always going to allocate capital to their company in their 401k."

Why? I certainly don't. You've already got enough of your financial future tied up with your employer without making your retirement contingent on their ongoing success as well. Ask all the nice folks at Lucent and Enron how this strategy worked out for them.

Often stock is how companies pay matching 401k contributions. That's why

RS ALSO did not READ the article. If he did, he would say that it specifically says that OTHER THAN MORGAN STANLEY, none of the banks mentioned do this anymore. Further, GS MAXES employees at 20% GS stock.

"Often stock is how companies pay matching 401k contributions. That's why"

Even if they still did this (sounds like they do not), you could just rebalance out, no? One of the great things about 401(k)s is that transaction fees are generally low to non-existent and you don't have to worry about the tax consequences of rebalancing.

Yes, after the vesting period people sell.

Yes you can/could rebalance out as soon as it is awarded.
I must add, 401k contributions or matches is minuscule amount compared to overall comp.

"Employees of public companies are always going to allocate capital to their company in their 401k."

Why? I certainly don't. You've already got enough of your financial future tied up with your employer without making your retirement contingent on their ongoing success as well. Ask all the nice folks at Lucent and Enron how this strategy worked out for them.

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+1. jordyn knows the basics of investing, usq and wall streeters don't. that simple.

@jason10006 the banks changed the matching only recently, since many have been sued for the practice. of course anyone who has a sizable 401k must have been at the bank for a while, so they'd have accrued stock in the past. even so, if you read the article, only one bank's employees' self-holdings were more concentrated than the average (13.4%, JPM was higher).

@notadmin just because a few people understand the Enron lesson doesn't mean the rest of the population's behavior is going to change. also, it's only really an issue if your 401k is your dominant source of wealth.

> @notadmin just because a few people understand the Enron lesson doesn't mean the rest of the population's behavior is going to change. also, it's only really an issue if your 401k is your dominant source of wealth.

BS. diversification is the most basic rule of asset allocation, and the most obvious application is that you shouldn't put your employer's stock in your portfolio. if that's not clear, you shouldn't be investing imho, ditto for wall streeters that don't get it. funny some of these guys get to give advice to others. oh my!