Comments on: Email: What to do about employer-sponsored stock purchase? http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase/ Personal finance blog for college students, recent graduates and everyone else -- including entrepreneurship -- for getting rich. Featured in the Wall Street Journal and New York Times. Sat, 21 Nov 2009 09:24:01 -0800 http://wordpress.org/?v=abc hourly 1 By: kevin http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase/comment-page-1/#comment-8584 kevin Wed, 21 Mar 2007 00:59:26 +0000 http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase#comment-8584 i love this site. i love this site.

]]> By: Ryan Steckler http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase/comment-page-1/#comment-138 Ryan Steckler Sat, 11 Mar 2006 04:17:12 +0000 http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase#comment-138 In general, it is best to contribute up to the max (usually 10-15% of your income up to 25k) in your companies ESPP. The exception is if the company is tanking. If you know the company is closing shop, you may not want to buy their stock, even at a discount. Even if this is the case, you can usually pull your money out of the plan before the purchase, understanding that you may be disqualified from the plan until the next round. Most plans have a "lookback" feature that allow you to get your 15% off the LOWER of the price of the stock at the beginning of the window and the end. So, if the stock was at 10$ at the beginning of the round and 15$ at the end (on purchase day), you will get your stock at 15% off 10$ per share. This means that even if the stock is falling or staying even, you are making money because of your lookback and discount. Now: To sell immediately or to hold? Selling immediately is fine. It's certainly better than not contributing at all. Just know that it isn't the BEST option. You will pay regular income tax on any money you make...so it's really just like getting a bonus check. It isn't the end of the world. BUT (and thats a BIG BUT!) if you can hold onto your stock for 12-18 months (depens on the plan), you will only pay regular income tax on a portion of the money you make when you sell. The rest you only pay long term capital gains taxes on. This means more money for you and less for the government AND it shows that you are a bit more savvy than the above manager by allowing your money to work for you in the long term. There is a lot more to it...I suggest googling for "Survey Findings: Employee Stock Purchase Plans" and reading that report if you have more questions. -Ryan In general, it is best to contribute up to the max (usually 10-15% of your income up to 25k) in your companies ESPP. The exception is if the company is tanking. If you know the company is closing shop, you may not want to buy their stock, even at a discount. Even if this is the case, you can usually pull your money out of the plan before the purchase, understanding that you may be disqualified from the plan until the next round.

Most plans have a “lookback” feature that allow you to get your 15% off the LOWER of the price of the stock at the beginning of the window and the end. So, if the stock was at 10$ at the beginning of the round and 15$ at the end (on purchase day), you will get your stock at 15% off 10$ per share. This means that even if the stock is falling or staying even, you are making money because of your lookback and discount.

Now: To sell immediately or to hold?

Selling immediately is fine. It’s certainly better than not contributing at all. Just know that it isn’t the BEST option. You will pay regular income tax on any money you make…so it’s really just like getting a bonus check. It isn’t the end of the world.
BUT (and thats a BIG BUT!) if you can hold onto your stock for 12-18 months (depens on the plan), you will only pay regular income tax on a portion of the money you make when you sell. The rest you only pay long term capital gains taxes on. This means more money for you and less for the government AND it shows that you are a bit more savvy than the above manager by allowing your money to work for you in the long term.

There is a lot more to it…I suggest googling for “Survey Findings: Employee Stock Purchase Plans” and reading that report if you have more questions.

-Ryan

]]> By: pb http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase/comment-page-1/#comment-137 pb Fri, 30 Dec 2005 05:27:14 +0000 http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase#comment-137 so in general, is it good to sell stocks immediately or wait? so in general, is it good to sell stocks immediately or wait?

]]> By: Ramit Sethi http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase/comment-page-1/#comment-136 Ramit Sethi Thu, 13 Oct 2005 21:08:53 +0000 http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase#comment-136 What do you mean, you don't have enough money to make a long-term investment? That doesn't make sense to me. If you have enough to invest, to be "long-term," you just think and act long-term. What do you mean, you don’t have enough money to make a long-term investment? That doesn’t make sense to me. If you have enough to invest, to be “long-term,” you just think and act long-term.

]]> By: Katie http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase/comment-page-1/#comment-135 Katie Thu, 13 Oct 2005 20:44:09 +0000 http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase#comment-135 I realize I'm reading this a lot later than the publish date, but I have this to say: I don't have enough money to make a long term investment, but I could buy stock and sell 6 weeks later and get free money, even if it's taxed at a really high rate. Is that better than doing nothing at all? I realize I’m reading this a lot later than the publish date, but I have this to say: I don’t have enough money to make a long term investment, but I could buy stock and sell 6 weeks later and get free money, even if it’s taxed at a really high rate. Is that better than doing nothing at all?

]]> By: Anonymous http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase/comment-page-1/#comment-134 Anonymous Thu, 11 Aug 2005 10:50:58 +0000 http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase#comment-134 By buying (and holding) your own company's stock, you're concentrating your investments (your job + your portfolio) in a single company. This is not good from a diversification point of view. (Think about the Enron staff.) By buying (and holding) your own company’s stock, you’re concentrating your investments (your job + your portfolio) in a single company. This is not good from a diversification point of view. (Think about the Enron staff.)

]]> By: Ye http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase/comment-page-1/#comment-133 Ye Thu, 04 Aug 2005 15:52:47 +0000 http://www.iwillteachyoutoberich.com/blog/email-what-to-do-about-employer-sponsored-stock-purchase#comment-133 While I agree with your long-term buy and hold if it's a good company investing style, I would advise your friend to buy and dump the shares immediately. Assuming your friend knows nothing about investing (which s/he appears to be), she could still profit handsomely at about 11% after deducting 35% tax. The 11% is guaranteed profit (aka free money). She can later take her money + 11% and invest in some other stocks if she wishes. But if she knows nothing about stocks, she should still take advantage of her ESPP because otherwise it'll be like leaving free money on the table for her employer. While I agree with your long-term buy and hold if it’s a good company investing style, I would advise your friend to buy and dump the shares immediately. Assuming your friend knows nothing about investing (which s/he appears to be), she could still profit handsomely at about 11% after deducting 35% tax. The 11% is guaranteed profit (aka free money). She can later take her money + 11% and invest in some other stocks if she wishes. But if she knows nothing about stocks, she should still take advantage of her ESPP because otherwise it’ll be like leaving free money on the table for her employer.

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