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I notice the general media is starting to concentrate on the harm
suffered by Enron employees that had large investments in company stock
in their 401k and were burned when the manager was changed (freezing the
accounts) at the same time the stock plummeted to almost nothing. Advice
is being given for employees of other companies to look at their own
401k and diversify.
My gut reaction is that this has to be bad for stocks and good for
bonds, given the current condition of the stock market and the likely
conservatism of the 401k holders. (Once you have made the decision to
diversify, are you really likely to do so in a risky fashion?)
Does anyone have any thoughts about how individual stocks may be
affected? I would think recently successful companies will be more prone
to being 'diversified down', companies that have done very well over the
last 3-5 years. These companies will be more prone to having created
large involuntary concentrations of risk for their employees accounts.
The ultimate example may be MSFT, which has continued to make its
employees very wealthy, has been successful in any reasonable time frame
you choose, and is now subject to ongoing legal action of indeterminate
size. Would you keep you millions in retirement dough in MSFT stock, or
would you, in light of the Enron case, look to sell MSFT and put your
money elsewhere?
Your thoughts would be appreciated
Regards
DanG
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