The Enron collapse provided a powerful lesson on the tragedies created by too much company stock in an employee retirement program -- and yet, many investors are still reluctant to diversify away from the stocks of their employers.

Marie in Mississippi is a case in point.

She wrote to say she's 38, married and has concerns about a 401(k) plan from when she worked for a large commercial bank. About 65 percent of that 401(k) is in stock of the company. Two years ago, before that stock took a tumble, it made up 80 percent of her 401(k) assets.

"Luckily, we have two other separate retirement funds we're building that have a far better asset allocation," she wrote.

Her question: Should she cut her losses on the company stock and roll the 401(k) over into an IRA? Or should she hang on waiting to break even in that stock?

I think the answer is pretty obvious. She understands what she needs to do, and she may be simply seeking an outside opinion to nudge her into action.

Here's a bit of pithy advice for Marie and the many other investors holding onto inappropriate investments they know should be replaced with something more productive.

It's never the wrong time to do the right thing. And it's always the wrong time to keep doing the wrong thing.

For Marie, "the right thing" is to roll the 401(k) over to an IRA and use the money to help properly diversify her whole portfolio. She should have large-cap funds, small-cap funds, growth funds, value funds and international funds.

The "wrong thing" for her is to continue to concentrate a lot of her account in a single stock, no matter how much she may believe it will come back.

Now is the right time for Marie to do the right thing and to stop doing the wrong thing.

If Marie is confident that she understands banking and she's sure that banking stocks will revive, she can always put a bit of money into a sector fund or specialty fund that focuses on such stocks. She'll have professional management as well as diversification.

The Fidelity Select Banking Fund (FSRBX: news, chart, profile) covers this industry well, though it charges a 3 percent sales load. The fund lost 7.7 percent in 2002 but beat the Standard & Poor's 500 Index ($SPX: news, chart, profile) by 20.3 percent per year for the three years ended last Friday.

A similar fund worth considering is the no-load T. Rowe Price Financial Services (PRISX: news, chart, profile). It lost 10.1 percent last year and has beaten the S&P 500 Index by 22.3 percent annualized over the past three years.

Still another approach to a banking fund is taken by the no-load FBR Small Cap Financial (FBRSX: news, chart, profile), which specializes in small banks and thrifts. This one has relatively high expenses of 1.53 percent, but it was up 18.7 last year and beat the S&P 500 Index by 39.8 percentage points a year over the past three years.

However, a narrow fund like this is suitable for only a small part of Marie's portfolio, perhaps 10 percent. The rest of it should be diversified broadly.

For the many investors in Marie's position now, the advice that we -- and many other advisors -- offered to all investors three years ago was to diversify. We repeated that advice two years ago and one year ago. And we repeat it today: Diversify your investments, don't concentrate them.

This applies to asset classes as well as to individual stocks. The Standard & Poor's 500 Index last year fell 23.4 percent. The Nasdaq 100 Index was down 31.5 percent. The Wilshire 5000 Index, which represents all but the tiniest public companies in the country, fell 22.1 percent.

Investors who took our advice to invest in a diversified equity portfolio of U.S. and international funds did better last year. Our Vanguard Model Portfolio fell only 16.3 percent; our Fidelity Model Portfolio lost 14.8 percent; and our Schwab Model Portfolio was down 13.3 percent. See model portfolios.

Those are all losses, of course. But if you think of a bear market as a storm, you can see the value of diversification. In a storm, the priority quickly becomes preservation instead of progress. In the market storm of 2002, diversification helped preserve investors' capital.

I'd love to get that message across to Marie and hundreds of thousands of other investors who are still holding large positions in stocks and funds that once looked like winners.

Lots of investors try to pick out tomorrow's winners in the market ahead of time, and lots of investors load up their portfolios with those picks. A few of those investors will succeed. But I have no doubt that a year from now, the majority of them will be disappointed.

That's what happened in 2000, again in 2001 and yet again last year. And I believe it will be the case in 2003 as well.

In January 2004, most of today's aggressive, over-confident investors who concentrate their portfolios will wish they had diversified widely. To borrow from the lyrics of a popular folk song from the 1960s, I wonder: "When will they ever learn?"