Devoted to understanding the basics and fundamentals of investing

On 5/31 in the "Personal Journal" section of The Wall Street Journal there are two interesting articles.  Jeff D. Opdyke writes "401(k) Plans Limit Company Stock", and Jonathan Clements writes "Due Diligence:  The Five Key Rules To Heed Before Hiring a Financial Adviser".  Both are on page D1.

You might remember that thousands of Enron employees had most of the money in their 401(k)s invested in Enron stock.  When the company went bankrupt, they lost their life savings.  As a result, many companies are changing the rules on their 401(k)s to limit the amount of company stock an employee may hold or prohibiting the purchase altogether to force diversification of risks.

I think this is an excellent idea.

Mr. Clements five warnings are as follows:

1. Use fee-only advisers.
2. Stick with CFPs [Certified Financial Planner] or, alternatively, ...chartered financial consultants, chartered financial analysts or certified public accountants-personal financial specialists.
3. Avoid advisors who won't commit to acting as a fiduciary (recommends what is "best" for the client versus only recommending investments that are "suitable".)
4. Pick advisors who can help you with mortgages, college costs, insurance, taxes and estate planning, not just picking stocks and mutual funds.
5. Make sure you don't pay too much.  Your performance after fees should outperform treasury bonds.

I intend to make this an episodic feature of this column.  If you see articles that would be interesting to our readership, bring them to my attention.  Now go forth and prosper.