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Thanks @andocas for automating this!
Sure thing!
I’ve finally got my first stock with my employers through their discount purchase plan. Does anyone have anecdotes or interesting math on when to sell?
It depends on the rules of the plan. Some plans require you hold for a certain amount of time, while others may let you sell immediately.
When I had employee stock, my philosophy was to sell ASAP and treat the discount as a cash bonus. Since I did not have an allocation for single company stocks in my investment plan, it made the most sense to sell and reinvest that money into VTSAX.
I can sell immediately, but it leaves me subject to the highest taxes with the least risk of price change.
Alternatively, you can consider the discount to be a guaranteed gain if you sell immediately. For example, my company had a 15% discount. That is better than the market so it made sense to me to want to lock in that kind of gain.
I think it depends on your overall investment philosophy. If you mentally treat this as a cash bonus, albeit an indirect bonus, then you shouldn’t be concerned about the tax treatment. It’s just the same rate as your normal income.
I’m not going to complain about the tax if my company wants to give me $3000, if all I need to do is remember to click a button to sell every 3 months. It gives me the same vibes as people who don’t want a raise because it would bump them into the next tax bracket.
Yes if you hold it longer you may pay less taxes, and if this stock otherwise fits within your investment philosophy, holding it can be the right choice. As an index investor, it was not for me, because I would otherwise never invest directly in my company (or any company). Getting that money into my desired allocation ASAP was the ideal strategy.
Yeah I think it depends on how it fits into your overall allocation. If it’s small enough I wouldn’t be against holding it a year to get taxed at LTCG rate vs your income rate. But you just have to look at the math and the volitility of the stock and decide for yourself if that makes sense
I usually sell everything as soon as I can. It was best when I was able to sell immediately; a 15% return on ~1.5 months investment time? I’ll take as much as I can and happily pay the tax on it.
Sadly, they now have us locked in to a 1 year minimum holding period, which sucks. I had still been selling everything as soon as I could, but the return is no longer guaranteed because the price can drop in that time.
Our stock dropped a while back to what I consider below market value and so I have been holding while the price has slowly come back up. The good news is that everything I’ve bought since then has been really cheap, but I’m now holding far more of my company’s stock than I would like as a share of my portfolio.
I think we’ve just recently gotten back to fair value, so I’m starting to think about selling. I’ve also been selling covered calls along the way, so I have at least gotten a little extra income while holding.
One item I think interesting, is that the effective period for the initial gain is one-half of the offer period. A 15% gain with a 6 month offer period becomes a 60% APR.
This then drops rapidly.
When to sell gets difficult.
Anyone else keep accidentally checking the market and then remembering its a bank holiday? It’s so much easier when I don’t have to work on the holiday, but my company doesn’t give us every federal holiday off.
I’ve been there. I have mostly gotten myself to the point that I only check about once a week unless I’m particularly unhappy with my job that day
I seem to go through phases. When the market was consistently down, I could go weeks without checking. Now there are consistent highs, I find myself checking several times a day.
I usually check the market at work, so major federal holidays are easy to avoid checking for me. The hard ones are the less common holidays when I’m still working.