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Be Smart About Owning Your Employer's Stock

By Dan Caplinger and Lauren Anderson - Apr 19, 2013 at 10:25AM

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Owning too much of your employer's stock can be a dangerous game.

Many workers are tempted to buy shares of their employer's stock. After all, you may know the ins and outs of your employer's business better than you understand any other company, and many companies make it possible for workers to buy employer stock within retirement plan accounts like 401(k)s, sometimes even at a discount.

In the following video, Motley Fool investment planning editor Lauren Kuczala talks with longtime Fool contributor and financial planner Dan Caplinger about the pros and cons of owning employer stock. As Dan notes, the main problem with owning too much employer stock is that you tie both your current salary income and your long-term investments to the same company, which can be disastrous if something bad happens to your employer. With companies like Ford (F 2.64%) having put limits on how much company stock you can own in their 401(k) plans, your smartest move is to keep your ownership of your employer's stock to a minimum and have a well-diversified investment portfolio.

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Stocks Mentioned

Citigroup Inc. Stock Quote
Citigroup Inc.
C
$52.77 (6.07%) $3.02
Ford Motor Company Stock Quote
Ford Motor Company
F
$12.83 (2.64%) $0.33
Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
CHKA.Q
BP p.l.c. Stock Quote
BP p.l.c.
BP
$32.11 (2.65%) $0.83

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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