My 401k, should I invest in my company stock or mutual funds?

my company stock is pretty low right now, its at $13/share

it took a big hit with the recent stock market collapse...fell from like $35, so i lost quite a bit of money, but im only 25, so thats okay...ive lost about $900

anyways, since its low, should i put most of my 401k contributions towards the stock (so hoping it goes up, i can gain lot of money back...?) or towards mutual funds - and if mutual funds, what kind? focus on international equities more or more domestic? seems like international has higher rate of return..but with stock there are no fund fees, mutual funds there are

thanks!!!

Well, that mainly depends on two things:

1) Why did your company's stock fall?
Is your company losing a lot of money? Is there a chance it will go bankrupt in the next year or two? Is it in a cyclic industry with a downturn that will recover with the US economy?

2) Does you company have a 401k matching plan? Many companies will match your investment, particularly when it in the own stock. For example, perhaps the company will give you 1 share for each 4 you buy, giving you a 25% profit cushion to hedge against future losses. In this case, the company stock will likely be a better investment.

Of course, you should talk with your HR rep about these matters. He/she can explain your options better (your mutual fund choices will likely be limited which will help narrow down your decision). You can also talk to experienced employees at your company and see what they recommend, because they may have a better idea of the future performance of the company as well how the company has reacted to dips in the past.

You are usually better off with diversified mutual funds than with the company stock. You may want to take a percentage of your contributions in mutual funds, but don't take a majority.

I would recommend no more then 20% in company stock. A more ideal figure would be between 10% and 15%. Anything above that puts you at more risk then necessary. If you did the 20% in your company stock, the remaining funds should be placed in bonds, small company stock, emerging markets, some large growth and other options. The percentage that you place in these will be based mostly on your age, and your risk tolerance. To closer you are to retirement the more conservative you will need to be -- mostly bonds and limited stock exposure. You may want to talk with an financial advisor if you want some guidance.

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