Brokers Lose $2B in Bad 401(k) Bets

If you work for a public company, there is often an Employee Stock Purchase Program and/or the ability to buy company stock in your retirement program. But some times employees double down on their employers out of a misguided sense of loyalty and/or some idea that they have insider knowledge (which would be illegal if it were true.

Workers at the five largest Wall Street banks saw the value of company stock in their 401(k) accounts, sometimes the biggest holding of those plans, decline more than $2 billion last year, according to annual filings. Those losses don’t include shares received as bonuses.

ESPP's are generally a good thing, as it allows you to buy company stock at some kind of discount or subsidized or pre-tax price, and then sell it after the lock up period expires.

On the other hand, investing your 401(k) in your company's stock is a terrible idea. Ask the employees of Enron and Lehman Brothers how much their loyalty was rewarded when they lost their jobs in addition to  the value of their retirement cratering.

HT: The Big Picture