Employer's Stock In a 401(K)

Jim Cramer of "Mad Money" fame has some interesting advice about employer's stock in a 401(K). In his words don't do it. "There are very few situations where you want to own stock in the company that writes your paychecks. Diversification is the single most important principle of investing, and you need to put your income on the table when you look at your investments. Your fate is already tied to the company, even if you don't invest a penny in its stock. If something really terrible happens to the company and it needs to take drastic measures to cut costs, you're already in trouble just because you're on the payroll."

I don't know if I completely agree with this because I know of normal "Joes" who became wealthy beyond their wildest dreams by investing prudently in their company's stocks during good economic times. But I do think that most people who work for large companies tend to put too much of their assets in company stock and then become unwilling to ever take a look at it as part of an asset allocation strategy or make changes when events start to catch up with them.

The single biggest issue I deal with all the time is investors who have too much of any one security as part of of their overall investments and their unwillingness to do anything about that fact.