Enron lessons remain unclear to some investors

According to a new survey from Charles Schwab & Co Inc., the collapse of Enron stock has made the vast majority of investors think twice about the way they invest.

The survey interviewed 620 adults 364 men and 256 women who reported that they have 401(k) plans through their employers.

According to the results, 72 percent admit that they have changed their in-vestment behavior in some way as a direct result of Enron news.

The most popular ways survey respondents changed their investing behavior are illustrated in the accompanying chart.

"One of Enron's most painful lessons is the danger of over-concentration in an individual stock just as the tech wreck of 2000 taught us we shouldn't be too heavily concentrated in particular industry sectors," said Carrie Schwab Pomerantz, vice president of consumer education for Charles Schwab & Co. Inc. "Yet it seems investors may still not appreciate how diversification across and within asset classes can help protect a portfolio against worst-case scenarios."

The survey was conducted Feb. 7-11 through Caravan, a national telephone omnibus survey. It was developed for Charles Schwab & Co. by Leflein Associates Inc. and fielded by Opinion Research Corporation International of New Jersey. The margin of error for the survey is plus or minus four percentage points.

401(k) findings

The survey also had several other interesting findings related to 401(k) plans.

For instance, of the surveyed investors who know that their company's stock is an investing option for them in their 401(k) plans, 23 percent hold more than 20 percent of the stock in their own plan account. The 20 percent threshold is significant because it represents the beginning range of a concentrated stock position, which can significantly increase overall portfolio risks, according to findings from the Schwab Center for Invest-ment Research.

A large majority 71 percent of survey respondents believe they should review their 401(k) accounts at least every six months, yet just 61 percent actually do so. And while only 4 percent say there's no need to ever review a 401(k) plan after it's been set up, 15 percent of the respondents admit that they have never reviewed their own plans.

"A retirement account, like any other type of investment account, shouldn't be left on automatic pilot," Schwab Pom-erantz said, noting that Charles Schwab & Co. recommends that holdings should be reviewed at least once every year.

Beyond the 401(k)

The survey also revealed that 34 percent of respondents didn't know which companies constitute the largest stock holdings of their mutual funds. While roughly another third have a general idea, only 21 percent of the respondents are "very clear" on the companies that represent the largest stock holdings in their mutual funds. "Without a clear picture of all the investments you hold in all the accounts in which you're investing you may be even more heavily weighted in a particular stock than you know," Schwab Pomerantz said. "You may be loading up on company stock in your 401(k) at work, plus have money invested in mutual funds elsewhere that have the very same stock among their top 10 holdings."

The Schwab survey also revealed that 33 percent of investors are less confident now than they were a year ago in their abilities to choose investments that will do well over time.

Founded in 1974, The Charles Schwab Corporation, via Charles Schwab & Co. Inc. and its operating subsidiaries, serves 7.8 million active accounts with $846 billion in client assets.