What Not to Do With Your 401(k)

Investing in a 401(k) is essential to any retirement plan. Every personal-finance talking head on TV will tell you that. But rarely do they tell you what to do with that 401(k).

Well, tonight on Mad Money Cramer told viewers what not to do. Namely, don’t use it to buy the stock of your employer.

Believe it or not, owning stock in the company you work for is the number-one 401(k) investment. The problem? It goes against Cramer’s golden rule of diversification. Think of all those Enron workers who lost their life savings when that company went under. They only owned Enron stock!

Cramer doesn’t care if you work for Apple, Research in Motion, Google, Exxon Mobil or McDonald’s. Don’t use your 401(k) to invest in your employer’s stock. You may think you’re investing in what you know. But what you’re really doing is overexposing yourself to unnecessary risk.

Jim's charitable trust owns McDonald's.

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  • Jim Cramer

    Jim Cramer is host of CNBC's "Mad Money" and co-anchor of the 9 a.m. ET hour of CNBC's "Squawk on the Street."

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