Firms Buy Own Stock With 401k Funds

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OWNInvestors are told again and again to diversify. By spreading their money over hundreds of kinds of investments, they make their portfolios safer, if less exciting.

But do you know what’s going on in your own 401(k)?

Ten of the 50 largest companies in the S&P 500 still put 401(k) contributions in the company’s own stock, according to Bloomberg’s ranking of retirement plans, which is based on data filed last year. That earns those companies a deduction on the ranking.

 It’s an “extreme example of poor diversification,” the behavioral economists Shlomo Benartzi of UCLA and Richard Thaler of the University of Chicago have written, echoing the warnings of many other economists and retirement experts. “Workers risk losing both their jobs and the bulk of their retirement savings all at once.”

Read more at BLOOMBERG