This article was written for my Golden Valley Patch Blog on August 6, 2011.
Because I have retirement plan advice clients at many of the largest Minnesota-based companies, I watch the daily stock price movements of the largest Minnesota public companies very closely.
The Star Tribune 100 is an index of the largest publicly held companies with headquarters in Minnesota ranked by annual revenues. This is the 2011 Minnesota company list.
I have found over the years that ownership of company stock by individual company retirement plan participants in their company 401(k) plan accounts is very popular. With many of the individual company retirement plan participants I meet with, company stock ownership in their company retirement plan account can many times be the largest percentage of their stock market exposure.
When the stock market goes through another historic correction like it did this week, individual company stock ownership can be more of an investment risk than most Minnesota company retirement plan participants realize.
Of the top 100 public companies in Minnesota, less than 32 percent of their stock prices are up in value for the year-to-date in 2011. Said another way, the majority of the companies on this Minnesota list have given their shareholders a negative year-to-date 2011 return.
Don’t ever think that just because you have the option of owning your company stock in your company 401(k) plan, you are allowed to “set it and forget it” in regard to the investment management of your company retirement plan.
Company stock ownership in a company retirement plan account is a huge level of investment management responsibility. Knowledge of economic conditions, industry trends, and stock market conditions is just the beginning of what you would need to keep track of when you own individual company stock.
More importantly, your employment is tied to the fortunes of the same company that can hold the largest percentage of your retirement plan. This combination is most times a bad mix for an individual company retirement plan investor.
Through no fault of their own, many Minnesota company stock prices got caught up in the historic stock market correction in the past week. That kind of price correction does not need to happen in your company retirement plan at the same time.
When there are many more “sellers” in the stock markets than willing “buyers,” no individual company stock is safe—no matter how big or small the company, or the product or servce they make. Even Minnesota companies are not immune to the basic laws of economics.
Ric Lager
Lager & Company, Inc.
