Wall Street Workers' Bad 401(k) Bet

Wall Street workers, many of whom dispense financial advice, aren’t following a basic investing tenet with their own money: diversification. Employees at the five largest Wall Street banks—JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs Group, and Morgan Stanley—saw the value of company stock in their 401(k) accounts, sometimes the biggest holding of those plans, decline more than $2 billion last year, according to annual filings.

Enron’s 2001 collapse led to warnings that tying retirement funds to an employer’s stock amplifies the misery when a company fails, resulting in the loss of both a nest egg and a source of income. “You’re already relying on that company for your job, your income, benefits, and everything else,” says Chris Baker, co-founder of Oaktree Financial Advisors. “It’s not just another stock. It can magnify the impact on your personal finances if your portfolio takes a beating and your employer isn’t doing well.” Baker says he advises clients to hold no more than 5 percent of their retirement accounts in their employers’ shares, and no more than 10 percent in any one stock.