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Best way to utilize employee stock purchase plan?
Posted on 9/4/15 at 9:01 am
Posted on 9/4/15 at 9:01 am
My company has an employee stock purchase plan option. You can set aside 1-15% of pretax income (but it is taken post-tax out of my paycheck). You set aside money for 3 months, and stock is purchased at the end of the 3 month period at a 15% discount of the lowest closing stock price on either the first or last day of the period. After stock is purchased, it must be held for 90 days until it can be sold. If it is sold within one year, short term capital gains tax is paid. If held more than one year, long term capital gains tax is paid.
Is the best strategy here to max it out, then sell each block of shares purchased as soon as possible (after 90 days?)
That seems like a good strategy, unless the stock is declining, which it is (I work for an oil company) and you are losing money.
Any wisdom on this topic?
Is the best strategy here to max it out, then sell each block of shares purchased as soon as possible (after 90 days?)
That seems like a good strategy, unless the stock is declining, which it is (I work for an oil company) and you are losing money.
Any wisdom on this topic?
5
Posted on 9/4/15 at 9:35 am to TheIndulger
i have tried to do this before, and for whatever reason it never worked as well as it sounded on paper.
your strategy is the right one. I tried it again last year as my company changed our stock purchase plan to be more favorable. But by the time the transaction cleared and we were out of the quiet period, I wouldn't have made any free money.
your strategy is the right one. I tried it again last year as my company changed our stock purchase plan to be more favorable. But by the time the transaction cleared and we were out of the quiet period, I wouldn't have made any free money.
Posted on 9/4/15 at 9:45 am to TheIndulger
quote:
Is the best strategy here to max it out, then sell each block of shares purchased as soon as possible (after 90 days?)
That seems like a good strategy, unless the stock is declining, which it is (I work for an oil company) and you are losing money.
It's the same thought process for any investments you buy isn't it? If the stock is down and going down, but you think it is a solid company with a good long term future, buy the shite out of it right now.
I too work for a oil company and we may be down a little bit, but this deal with the 15% discount along with a nice little dividend makes it a no brainer to buy and hold for a long period of time.
Posted on 9/4/15 at 9:54 am to TheIndulger
quote:Do you have confidence in the long-term success of the company? If so, then you should expect the share price to recover, and look at the declining price as an opportunity to buy shares on the cheap. If the company has a dividend reinvestment plan, I'd participate in that too. The purpose of a stock purchase plan is to build wealth over time, not to provide short-term income.
That seems like a good strategy, unless the stock is declining, which it is (I work for an oil company) and you are losing money.
Posted on 9/4/15 at 6:58 pm to notiger1997
quote:
It's the same thought process for any investments you buy isn't it? If the stock is down and going down, but you think it is a solid company with a good long term future, buy the shite out of it right now.
The thing is it's a company that spun off of another company and IPO'd in December (great timing right?). So not a ton of faith in the company. But if oil goes up, we go up, so if anything it's a discounted way to buy at low oil prices.
But yeah ultimately it's a stock and is volatile.
Posted on 9/4/15 at 7:31 pm to TheIndulger
You definitely need to utilize it. However, be careful with having a very large % of your portfolio in stock of the company you work for. That is way too many eggs in the same basket. If you work for a large stable oil company definitely hold on to some stock but make sure the only investments you own aren't your company stock.
ETA: Just read your most recent post. Definitely steer clear if you work there and don't have a lot of faith in the company.
ETA: Just read your most recent post. Definitely steer clear if you work there and don't have a lot of faith in the company.
This post was edited on 9/4/15 at 7:32 pm
Posted on 9/4/15 at 8:00 pm to yellowhammer2098
^^^This.
I worked for a Total subsidiary for a number of years and accumulated shares under their ESOP. I believe that our required holding period was 2-3 years. There was a similar percentage discount as what you've been offered. But we could purchase shares under a loan agreement, with the provision that the interest on the loan went back into the employee's account. We could also collect the dividends, even before the loan was paid off.
Seemed a pretty sweet deal and a way to accumulate shares in a global player at a substantial discount... and almost get paid to do it. Then this thing called The Great Recession hit. I was able to dump my position for only a small loss, and maybe I broke even counting the dividends. The last time I looked, TOT has only touched my purchase price a couple of times since the recession. And I don't believe it's gotten close to the market price back then.
So that wall of text to say, ESOPs are a good deal... until they aren't. As other have already said, just don't overweight your portfolio with one.
I worked for a Total subsidiary for a number of years and accumulated shares under their ESOP. I believe that our required holding period was 2-3 years. There was a similar percentage discount as what you've been offered. But we could purchase shares under a loan agreement, with the provision that the interest on the loan went back into the employee's account. We could also collect the dividends, even before the loan was paid off.
Seemed a pretty sweet deal and a way to accumulate shares in a global player at a substantial discount... and almost get paid to do it. Then this thing called The Great Recession hit. I was able to dump my position for only a small loss, and maybe I broke even counting the dividends. The last time I looked, TOT has only touched my purchase price a couple of times since the recession. And I don't believe it's gotten close to the market price back then.
So that wall of text to say, ESOPs are a good deal... until they aren't. As other have already said, just don't overweight your portfolio with one.
Posted on 9/4/15 at 8:45 pm to Jag_Warrior
Im putting a lot into it, but it's not my whole portfolio. I'm doing 15% in the 401k and the company does a good match.
This post was edited on 9/4/15 at 8:50 pm
Posted on 9/4/15 at 9:15 pm to TheIndulger
With your deal, being able to sell after a 90 day hold, I'd probably eat that up too. Unless things go to total crap (Total pun included there 
), you seem to have some decent, shorter term, downside protection that I didn't really have.
), you seem to have some decent, shorter term, downside protection that I didn't really have.
Posted on 9/6/15 at 7:40 pm to TheIndulger
Being able to purchase not only at a discount, but a discount from the lowest price is by itself a hell of a deal. Definitely do it.
As others have pointed out though it is not a good idea to have too much invested in your employer. Every so often I sell everything I have that is subject to long-term capital gains. I guess if you have inside info you could take the short-term hit but unless you know more than the market (which is doubtful) I wouldn't bother.
As others have pointed out though it is not a good idea to have too much invested in your employer. Every so often I sell everything I have that is subject to long-term capital gains. I guess if you have inside info you could take the short-term hit but unless you know more than the market (which is doubtful) I wouldn't bother.
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