I work for a company that allows me to purchase stock on a monthly basis for 85% of the market price at the end of the month. I have to plan the purchases, so it is an investment, not a speculation.
After reading about companies like Enron and WorldCom where people lost their entire retirement because of investment in company stock, many investors are wary of purchasing stock in their company. I know many people who are not buying stock where I work for fear of losing their investment.
The question of buying company stock comes down to risk. If you have $100,000 put away for retirement and $700,000 is in your company stock, you are doing something very wrong. If you have 70% of your money in any one stock, you are doing something very wrong.
It is important to have a diverse portfolio. That includes company stock. I do participate in my company’s stock plan, but only a small portion of my assets are in that stock. I put 2% of my pay into company stock. 8% goes into diversified funds. I have other stock investments as well.
So, should you buy company stock? Would you buy stock in the company if you did not work there? If yes, you should. If no, you shouldn’t. Look at company outlook and earnings. Only by looking at the stock from the eyes of an investor, rather than an employee, can you make a good decision. I think my company stock is going to go up quite a bit in the long run, so I make the investment. However, I am diversified if anything goes wrong where I work. Never keep all of your eggs in one basket.
