June 2, 1997

Q. I am 34 and my annual salary is $50,000. Of this, I contribute 10 percent of my pretax salary to a 410(k) plan, where I have a vested balance of $70,000. Of this, 80 percent is in my company's stock and the rest in an equity fund. In addition, I contribute 5 percent of my after-tax salary to my company's stock purchase plan. Under this plan, the price of the stock on the first and last days of each quarter is noted, and we buy shares at a price representing 85 percent of the lower price. My balance is $7,600, and I am building this account to use as a down payment for my first house. Should I make any changes?

L.L., San Diego

A. You're relying too much on your company's stock. There may be no problem with the heavy concentration of its stock in your retirement program, but that's certainly enough.

On the other hand, I don't advocate pulling out of the stock purchase plan. Its terms are sufficiently generous that it would probably be silly -- or costly -- to do so. But I suggest you adopt the strategy of selling the shares acquired through that plan as soon as you're allowed to. (Many such plans issue stock that cannot be sold for a specified period) I certainly think the 15 percent or more discount justifies holding the stock for whatever the waiting period is, but both because of your heavy holdings of the company stock in the retirement plan and the short-to-intermediate time frame of your real estate savings program, I would minimize that account's exposure to the stock market.

If you calculate that you're likely to buy a house within five years, I suggest the proceeds of the stock sale be put in a good money market mutual fund or CDs. (But don't use bank money market funds, many of which pay much less than the 5 percent or so currently available from the better mutual money market funds.)