Coming from easily the worse Coming from easily the worse stock picker on piggington’s
I say sell now at least to the point of getting your money and fees back.
Maybe hold the profit as stocks.
Coronita
May 1, 2014 @
1:05 PM
The-Shoveler wrote:Coming [quote=The-Shoveler]Coming from easily the worse stock picker on piggington’s
I say sell now at least to the point of getting your money and fees back.
Maybe hold the profit as stocks.[/quote]
Maybe I’ll sell and load up on Growlife (PHOT)…..What could go wrong, right?
Just kidding…….
spdrun
May 1, 2014 @
1:10 PM
Why not sell 50% of the stock Why not sell 50% of the stock and hold the other half? Have it both ways, so you won’t be too disappointed whatever happens.
SK in CV
May 1, 2014 @
1:48 PM
“I made a fortune getting out “I made a fortune getting out too soon” J P Morgan
“I lost a fortune getting out too late” SK in CV
joec
May 3, 2014 @
8:08 AM
In my past with ESPP stock, In my past with ESPP stock, I’ve always sold immediately because if you don’t, it’s as if you’re taking your income and buying MORE of your company stock.
I assume you also have options or at least restricted stock units since it sounds like a lot of ISO stock isn’t done anymore…
But if the company does well, your options will make you wealthy and if you already depend on your company for your healthcare, income, mortgage, etc etc etc, why put more risk and money in buying more company stock and keeping for 2 years?
Either way, the options are what will make you wealthy, not the ESPP…so minimize your risk, be happy with the massive gains and put the money in other investments.
Again, just because you sell (and i tell a lot of people this), doesn’t mean the money you newly invest will do worst/better neither.
Just a risky bet to dump more money into your company since this is money from your paycheck.
UCGal
May 5, 2014 @
10:23 AM
It’s part of my overall It’s part of my overall investing policy to churn-n-burn. Sell as soon as vested.
I have two (related) reasons for this:
* I don’t want a large position in the company stock because I’ve already tied my financial future with them for a paycheck – I’d like to diversify that money. (Think Enron.)
* I’ve already got a vested outcome in the stock going up with the next cycle of ESPP – I don’t need to extend that position.
Options and RSUs are a different matter. No skin in the game to purchase them. But ESPP – that’s MY money invested.
And color me jealous on the 20% – we only get a 15% discount.
an
May 5, 2014 @
10:39 AM
I would hold hoping for a I would hold hoping for a long term cap gain. All the while, put in a 3-5% stop loss in, so just incase it start to fall, you’re only out 3-5%. All the while, potentially capturing and gain and have the long term cap gain.
If it’s RSU, I’d sell right away, since there’s no tax reason to keep, since you already paid tax when it vests. But w/ ESPP, you haven’t paid tax yet, so you do have an opportunity to save some $ in taxes.
joec
May 5, 2014 @
6:27 PM
AN wrote:I would hold hoping [quote=AN]I would hold hoping for a long term cap gain. All the while, put in a 3-5% stop loss in, so just incase it start to fall, you’re only out 3-5%. All the while, potentially capturing and gain and have the long term cap gain.
If it’s RSU, I’d sell right away, since there’s no tax reason to keep, since you already paid tax when it vests. But w/ ESPP, you haven’t paid tax yet, so you do have an opportunity to save some $ in taxes.[/quote]
Check with a tax adviser, but with ESPP stock, you are usually buying it with AFTER tax dollars so you’ve already paid taxes on it (you used your income to buy it). It’s really just about whether you want to try to qualify for long term capital gains or not and having to hold more of your company stock which you already own a lot of (assuming relative to how much ESPP you can even buy) for 2 years is a VERY risky move…
an
May 5, 2014 @
7:17 PM
joec wrote:AN wrote:I would [quote=joec][quote=AN]I would hold hoping for a long term cap gain. All the while, put in a 3-5% stop loss in, so just incase it start to fall, you’re only out 3-5%. All the while, potentially capturing and gain and have the long term cap gain.
If it’s RSU, I’d sell right away, since there’s no tax reason to keep, since you already paid tax when it vests. But w/ ESPP, you haven’t paid tax yet, so you do have an opportunity to save some $ in taxes.[/quote]
Check with a tax adviser, but with ESPP stock, you are usually buying it with AFTER tax dollars so you’ve already paid taxes on it (you used your income to buy it). It’s really just about whether you want to try to qualify for long term capital gains or not and having to hold more of your company stock which you already own a lot of (assuming relative to how much ESPP you can even buy) for 2 years is a VERY risky move…[/quote]what I mean is, with ESPP, you have a built in 15% gain minimum from day one, while RSU, you have 0% gain. So, there’s no reason to keep RSU, but ESPP, you might want to preserve some of that 15% gain with long term cap gain vs short term.
Coronita
May 5, 2014 @
7:43 PM
joec wrote:AN wrote:I would [quote=joec][quote=AN]I would hold hoping for a long term cap gain. All the while, put in a 3-5% stop loss in, so just incase it start to fall, you’re only out 3-5%. All the while, potentially capturing and gain and have the long term cap gain.
If it’s RSU, I’d sell right away, since there’s no tax reason to keep, since you already paid tax when it vests. But w/ ESPP, you haven’t paid tax yet, so you do have an opportunity to save some $ in taxes.[/quote]
Check with a tax adviser, but with ESPP stock, you are usually buying it with AFTER tax dollars so you’ve already paid taxes on it (you used your income to buy it). It’s really just about whether you want to try to qualify for long term capital gains or not and having to hold more of your company stock which you already own a lot of (assuming relative to how much ESPP you can even buy) for 2 years is a VERY risky move…[/quote]
It’s a little more complicated than that, because it depends on whether the sales was qualifying or disqualifying, and whether it’s long or short term…
I think what AN is saying is RSU, income taxes are due the day you vest.. versus with ESPP, no taxes (income or capital gains) until you sell…And for ESPP, how much is considered income versus capital gains (long or short) depends on a few factors..
1. FMV of the stock @ exercise date
2. FMV of the stock @ offering date
3. FMV of the stock @ sales date
4. Date of offering
5. Date of exercise
6. Date of sales.
an
May 5, 2014 @
8:13 PM
flu wrote:joec wrote:AN [quote=flu][quote=joec][quote=AN]I would hold hoping for a long term cap gain. All the while, put in a 3-5% stop loss in, so just incase it start to fall, you’re only out 3-5%. All the while, potentially capturing and gain and have the long term cap gain.
If it’s RSU, I’d sell right away, since there’s no tax reason to keep, since you already paid tax when it vests. But w/ ESPP, you haven’t paid tax yet, so you do have an opportunity to save some $ in taxes.[/quote]
Check with a tax adviser, but with ESPP stock, you are usually buying it with AFTER tax dollars so you’ve already paid taxes on it (you used your income to buy it). It’s really just about whether you want to try to qualify for long term capital gains or not and having to hold more of your company stock which you already own a lot of (assuming relative to how much ESPP you can even buy) for 2 years is a VERY risky move…[/quote]
It’s a little more complicated than that, because it depends on whether the sales was qualifying or disqualifying, and whether it’s long or short term…
I think what AN is saying is RSU, income taxes are due the day you vest.. versus with ESPP, no taxes (income or capital gains) until you sell…And for ESPP, how much is considered income versus capital gains (long or short) depends on a few factors..
1. FMV of the stock @ exercise date
2. FMV of the stock @ offering date
3. FMV of the stock @ sales date
4. Date of offering
5. Date of exercise
6. Date of sales.[/quote]
Exactly. Lets say you were lucky and on top of the 15% discount, your company stock went up and so on exercise date, you’re up 50%+. Are you ready to cash that gain in and pay short term cap gain or do you want to take a risk and hoping it doesn’t crash and wait for that long term cap gain before selling.
joec
May 6, 2014 @
7:43 AM
Thanks for all the info and Thanks for all the info and as I said, I haven’t dealt with ESPPs in ages.
Still, all that said, since the fact of the matter is you’re still using your income to purchase these shares vs. them being given to you, I’d still sell (and have in my past when I had them) vs. trying to gamble and hope they go higher or let the tail way the dog with taxes…You had a huge gain in the short term with income dollars, sell, pay the tax and move on is what “I’d do”.
The tax bill, I suppose is of secondary priority and still boils down to trying to wait for either long term or short term gains. The long term gains, I believe is still 2 years from grant date (1 year from exercise) unless they changed the rules so that’s still a long time to wait for my income dollars (again, IMO).
The market risk is too high since, again, I’m assuming most people with ESPP also have RSUs and depend on their company for income/healthcare/etc…
I really don’t need to hold more of my company stock I guess. I remember in my past, I had 95% of my net worth in 1 company. Sold some, but should’ve sold more really.
Also note that if you sell now, tax won’t be due for like a year.
Coronita
May 6, 2014 @
10:01 AM
joec wrote:Thanks for all the [quote=joec]Thanks for all the info and as I said, I haven’t dealt with ESPPs in ages.
Still, all that said, since the fact of the matter is you’re still using your income to purchase these shares vs. them being given to you, I’d still sell (and have in my past when I had them) vs. trying to gamble and hope they go higher or let the tail way the dog with taxes…You had a huge gain in the short term with income dollars, sell, pay the tax and move on is what “I’d do”.
The tax bill, I suppose is of secondary priority and still boils down to trying to wait for either long term or short term gains. The long term gains, I believe is still 2 years from grant date (1 year from exercise) unless they changed the rules so that’s still a long time to wait for my income dollars (again, IMO).
The market risk is too high since, again, I’m assuming most people with ESPP also have RSUs and depend on their company for income/healthcare/etc…
I really don’t need to hold more of my company stock I guess. I remember in my past, I had 95% of my net worth in 1 company. Sold some, but should’ve sold more really.
Also note that if you sell now, tax won’t be due for like a year.[/quote]
I agree with you. I guess it depends on the company you work for I guess and the relative stability of the company… I use to work for a company that did finance software, and they were a pretty stable company so it made sense to hold…
These days, I work at a mobile tech company, and it’s pretty cut throat these days…. based on our competition (or perceived competition)….I guess that’s why I’ve asked what others are doing….
an
May 6, 2014 @
1:44 PM
flu wrote:I agree with you. I [quote=flu]I agree with you. I guess it depends on the company you work for I guess and the relative stability of the company… I use to work for a company that did finance software, and they were a pretty stable company so it made sense to hold…
These days, I work at a mobile tech company, and it’s pretty cut throat these days…. based on our competition (or perceived competition)….I guess that’s why I’ve asked what others are doing….[/quote]You’re right, it really depends on which company you’re working for. But, this essentially describes all stock investment. To sell or not to sell first and foremost, should be decided on whether you expect the stock to go up, stay flat, or crash and burn. If you think it’s the first two, then it’s work holding. While if it’s the later, then sell as soon as you can. The tax is definitely secondary. However, since none of us have crystal ball, this is why I say keep it if you don’t expect it to crash imminently, but have a stop loss in there, just in case it does.
Hatfield
May 6, 2014 @
4:02 PM
I dumped half and kept half. I dumped half and kept half. I still have some QCOM shares with a $2.75 basis. 🙂
joec
May 6, 2014 @
5:49 PM
Having worked in the finance Having worked in the finance industry and advised clients as well as to what to do with their money, I really think if people can actually predict what a stock will do, you really need to quit your jobs and just manage money.
This is why I keep going back to you are using your income to purchase theses shares (at a discount of course)…
The stock can do anything and honestly, unless you have great inside information (insider trading to a degree no matter what since you work there)…it makes sense to not predict what will happen and just do what makes the most sense financially long term.
I guess my thinking is what the stock does is irrelevant in my mind since I can’t predict the future and company workers are notoriously bullish on their own firms making them blinded I feel…
Either way, some good thoughts and nice to at least partition what really you’re trying to gain (risk/reward). Remember, you can always invest the money you gained and it could do better in other investments and in turn, also lower your risk/investment profile.
an
May 6, 2014 @
11:41 PM
joec wrote:Having worked in [quote=joec]Having worked in the finance industry and advised clients as well as to what to do with their money, I really think if people can actually predict what a stock will do, you really need to quit your jobs and just manage money.
This is why I keep going back to you are using your income to purchase theses shares (at a discount of course)…
The stock can do anything and honestly, unless you have great inside information (insider trading to a degree no matter what since you work there)…it makes sense to not predict what will happen and just do what makes the most sense financially long term.
I guess my thinking is what the stock does is irrelevant in my mind since I can’t predict the future and company workers are notoriously bullish on their own firms making them blinded I feel…
Either way, some good thoughts and nice to at least partition what really you’re trying to gain (risk/reward). Remember, you can always invest the money you gained and it could do better in other investments and in turn, also lower your risk/investment profile.[/quote]Of course no one can predict the direction of stock, but that applies to all stocks, regardless of whether you got it through ESPP or buying it through the open market.
You are correct, it is using income to purchase these share. But the question is, what will you do with the money when you sell? Will you take it and buy something else? How much will you gain with the new stock vs your company’s stock. The risk of decline/increase is equal with all stocks. Like you said, no one can predict the future. But we all know what the tax implication is today.
So, here’s an example. Lets say you make $100k year and the company allow you to put 20% away for ESPP. Which mean each 6 months period, you can put away $10k. Lets also assume that your company increased in stock price and at the time of purchase of the ESPP share, you’re are up 50%. So, your $10k ESPP investment is now worth $15k. Lets assume you’re in a 28% tax bracket, your total short term cap gain tax is 37.25%, or $1862.50. Which mean your net is $13137.50. If you keep it for a year and your stock stayed flat, your net would be $14250. Which means, the new investment you purchase would have to gain ~8.5% more than your company stock, in order for you to break even. The question to you is, how confident are you to pick a new stock that can beat out your company’s stock by 8.5%. If you’re in a higher tax bracket, the % your new stock need to gain would also increase. This is why I tend to prefer to keep the ESPP shares a year while sell my RSU right away. I’m not confident that I can find a new stock that beat out my company’s stock that greatly (this is assuming that your company’s stock is up over the 6 months period).
Now, lets see what it would look like if it’s on its way down. If it’s on its way down, then you’re automatically up 15%. So, your $10k investment is $11500 the time of purchase of the ESPP shares. If you sell right away, your net would be $10941.25, while if you hold it a year and the stock price doesn’t change, your net would be $11275. Which means your new investment from the net sale of your ESPP would have to beat your company’s stock by ~3% to make it worth while. This might be a more obvious time to sell if you think you can do better than 3% over your company’s stock.
This is why I say it all depends on what’s currently going on at your company and what you expect to happen in the future with your company’s stock vs the stock you’re planning to buy with your ESPP proceed. There’s no black and white answer to whether to sell or not.
Now, I don’t deny that you need to diversify. I’m not saying to keep it forever and not diversify. You can always diversify after you sell after 1 year. After a few years, I think you’ll be pretty diversified.
joec
May 5, 2014 @
6:28 PM
double post double post
Coronita
May 5, 2014 @
11:10 AM
UCGal wrote:It’s part of my [quote=UCGal]It’s part of my overall investing policy to churn-n-burn. Sell as soon as vested.
I have two (related) reasons for this:
* I don’t want a large position in the company stock because I’ve already tied my financial future with them for a paycheck – I’d like to diversify that money. (Think Enron.)
* I’ve already got a vested outcome in the stock going up with the next cycle of ESPP – I don’t need to extend that position.
Options and RSUs are a different matter. No skin in the game to purchase them. But ESPP – that’s MY money invested.
And color me jealous on the 20% – we only get a 15% discount.[/quote]
Whoops, I think ours was 15% off, up to 20% of your annual salary… I got the numbers mixed up… I never bothered to look. The current market price though is still 36% above the purchase price though…lol… Ok folks convinced me… Sell….
UCGal
May 6, 2014 @
7:59 AM
flu wrote:
Whoops, I think [quote=flu]
Whoops, I think ours was 15% off, up to 20% of your annual salary… I got the numbers mixed up… I never bothered to look. The current market price though is still 36% above the purchase price though…lol… Ok folks convinced me… Sell….[/quote]
Still a better deal than we get – we’re limited to 10% of our salary. And worse than that – the stupid interface makes you enter a $ amount per paycheck. Even to the $… no cents. So if merit increases, or promotions come along – you don’t get the bump in the ESPP. (I have NO idea why they don’t let us enter a percentage of gross pay NOR why bonuses are not included in the ESPP program…. very frustrating.)
Coronita
May 1, 2014 @
1:02 PM
If you are part of an ESPP If you are part of an ESPP plan, what do you do typically do with your ESPP shares?
Do you sell immediately, as soon as you vest?
Or do you hang on to them for to try to get the long term capital gains?
Or do you do a combination thereof?
I’m looking at some recent ESPP shares that were discounted 20% off the FMV a few months back when my company’s stock took a hit. The purchase price was determined to be 20% off a low fair market price…. The stock has recovered more or less (almost), and the shares have vested.. Selling immediately would return about 36.4% in 6 months…I could try to hang on for 2 years
Company prospects are…. well let’s just say it’s no Apple or Google high flyer…And it’s pretty cut-throat…
I’m leaning toward dumping especially since we’re heading into May/June, and especially since the markets in general have been flat so far this year (maybe 5-6% if you follow the indexes)….I don’t see a 30-40+% gain this year in the market this year like last…. Hanging on for long term cap gains, to me seems highly riskier in this environment..
What do you typically do?
Coronita
May 6, 2014 @
8:31 PM
Well thanks everyone.. I Well thanks everyone.. I ended up selling some today. Saved about $1500 before things got really hairy this afternoon when Nasdaq went down further…
Internet virtual beers for everyone on me…. 🙂
an
May 7, 2014 @
7:16 AM
flu wrote:Well thanks [quote=flu]Well thanks everyone.. I ended up selling some today. Saved about $1500 before things got really hairy this afternoon when Nasdaq went down further…
Internet virtual beers for everyone on me…. :)[/quote]Hope you didn’t take that proceed and buy GOOG :-).
joec
May 7, 2014 @
8:46 AM
I think the reason we have I think the reason we have different views on this AN is because I view the ESPP as not an investment. I look at it purely as FREE bonus money.
Again, I’ve been in everyone’s shoes with ESPPs at multiple startups/companies and have gone through that in the past, but that doesn’t change my views still since in the end, the gain isn’t that big between the two of keeping it just for the tax gain vs. the high risk of holding something for 2 years/1 year. Look at TWTR as an example. If you sold immediately yesterday, you’d be selling at 35 (sell right away). Do you really want to play such volatility and now, wait another 1 or 2 years depending on when you joined the company?
Not to mention, the gut wrenching during that time as to what to do.
The tax implications in my mind are really just secondary…
As we both agree, no one can know what will happen with the stock and what a new investment will do. To me, it’s not even about whether I can pick something else. Maybe I will just sit on the cash.
It all boils down to me viewing ESPP as FREE money and a bonus. It’s a 100% guaranteed gain of about 18% which can result in a loss if you hold it. I just don’t play that with my money or client’s money since most employees are already heavily weighed in their own companies shares. Like if you are a millionaire at TWTR with your stock options or RSUs, do you really need to eek out a few more thousands from ESPP tax benefits?
Similar to me never buying my company stock with cash on the open market, I’m just not that risk taking when it comes to my own income to put even MORE of my net worth in the company I work for.
Also, I really feel people working for the place they work tend to be too bullish.
an
May 7, 2014 @
12:42 PM
joec wrote:I think the reason [quote=joec]I think the reason we have different views on this AN is because I view the ESPP as not an investment. I look at it purely as FREE bonus money[/quote]I guess this is the crux of our differences. I view it as investment AND a bonus while you see it purely as a bonus. Because I view it as an investment as well, tax does come into play wrt when to sell. If you view it purely as a bonus, then of course, sell ASAP.
BTW, while you can point to TWTR, I can also point to QCOM or AAPL or GOOG. I can go on and on. But at the end of the day, the crux of our differences is how we view the 15% discount.
NicMM
May 9, 2014 @
1:49 PM
I was planning to hold my I was planning to hold my company ESPP for the long capital gain, but holding it three more months made me losing $$$$$ already as the stock dropped like a rock after a flying up earlier this year. So I just sold them to bag a tiny gain and prevent loss.
an
May 9, 2014 @
2:16 PM
NicMM wrote:I was planning to [quote=NicMM]I was planning to hold my company ESPP for the long capital gain, but holding it three more months made me losing $$$$$ already as the stock dropped like a rock after a flying up earlier this year. So I just sold them to bag a tiny gain and prevent loss.[/quote]This is why I tend to have a stop loss in place. That way, if $hit hit the fan, you’re protected.
May 1, 2014 @ 1:01 PM
Coming from easily the worse
Coming from easily the worse stock picker on piggington’s
I say sell now at least to the point of getting your money and fees back.
Maybe hold the profit as stocks.
May 1, 2014 @ 1:05 PM
The-Shoveler wrote:Coming
[quote=The-Shoveler]Coming from easily the worse stock picker on piggington’s
I say sell now at least to the point of getting your money and fees back.
Maybe hold the profit as stocks.[/quote]
Maybe I’ll sell and load up on Growlife (PHOT)…..What could go wrong, right?
Just kidding…….
May 1, 2014 @ 1:10 PM
Why not sell 50% of the stock
Why not sell 50% of the stock and hold the other half? Have it both ways, so you won’t be too disappointed whatever happens.
May 1, 2014 @ 1:48 PM
“I made a fortune getting out
“I made a fortune getting out too soon” J P Morgan
“I lost a fortune getting out too late” SK in CV
May 3, 2014 @ 8:08 AM
In my past with ESPP stock,
In my past with ESPP stock, I’ve always sold immediately because if you don’t, it’s as if you’re taking your income and buying MORE of your company stock.
I assume you also have options or at least restricted stock units since it sounds like a lot of ISO stock isn’t done anymore…
But if the company does well, your options will make you wealthy and if you already depend on your company for your healthcare, income, mortgage, etc etc etc, why put more risk and money in buying more company stock and keeping for 2 years?
Either way, the options are what will make you wealthy, not the ESPP…so minimize your risk, be happy with the massive gains and put the money in other investments.
Again, just because you sell (and i tell a lot of people this), doesn’t mean the money you newly invest will do worst/better neither.
Just a risky bet to dump more money into your company since this is money from your paycheck.
May 5, 2014 @ 10:23 AM
It’s part of my overall
It’s part of my overall investing policy to churn-n-burn. Sell as soon as vested.
I have two (related) reasons for this:
* I don’t want a large position in the company stock because I’ve already tied my financial future with them for a paycheck – I’d like to diversify that money. (Think Enron.)
* I’ve already got a vested outcome in the stock going up with the next cycle of ESPP – I don’t need to extend that position.
Options and RSUs are a different matter. No skin in the game to purchase them. But ESPP – that’s MY money invested.
And color me jealous on the 20% – we only get a 15% discount.
May 5, 2014 @ 10:39 AM
I would hold hoping for a
I would hold hoping for a long term cap gain. All the while, put in a 3-5% stop loss in, so just incase it start to fall, you’re only out 3-5%. All the while, potentially capturing and gain and have the long term cap gain.
If it’s RSU, I’d sell right away, since there’s no tax reason to keep, since you already paid tax when it vests. But w/ ESPP, you haven’t paid tax yet, so you do have an opportunity to save some $ in taxes.
May 5, 2014 @ 6:27 PM
AN wrote:I would hold hoping
[quote=AN]I would hold hoping for a long term cap gain. All the while, put in a 3-5% stop loss in, so just incase it start to fall, you’re only out 3-5%. All the while, potentially capturing and gain and have the long term cap gain.
If it’s RSU, I’d sell right away, since there’s no tax reason to keep, since you already paid tax when it vests. But w/ ESPP, you haven’t paid tax yet, so you do have an opportunity to save some $ in taxes.[/quote]
Check with a tax adviser, but with ESPP stock, you are usually buying it with AFTER tax dollars so you’ve already paid taxes on it (you used your income to buy it). It’s really just about whether you want to try to qualify for long term capital gains or not and having to hold more of your company stock which you already own a lot of (assuming relative to how much ESPP you can even buy) for 2 years is a VERY risky move…
May 5, 2014 @ 7:17 PM
joec wrote:AN wrote:I would
[quote=joec][quote=AN]I would hold hoping for a long term cap gain. All the while, put in a 3-5% stop loss in, so just incase it start to fall, you’re only out 3-5%. All the while, potentially capturing and gain and have the long term cap gain.
If it’s RSU, I’d sell right away, since there’s no tax reason to keep, since you already paid tax when it vests. But w/ ESPP, you haven’t paid tax yet, so you do have an opportunity to save some $ in taxes.[/quote]
Check with a tax adviser, but with ESPP stock, you are usually buying it with AFTER tax dollars so you’ve already paid taxes on it (you used your income to buy it). It’s really just about whether you want to try to qualify for long term capital gains or not and having to hold more of your company stock which you already own a lot of (assuming relative to how much ESPP you can even buy) for 2 years is a VERY risky move…[/quote]what I mean is, with ESPP, you have a built in 15% gain minimum from day one, while RSU, you have 0% gain. So, there’s no reason to keep RSU, but ESPP, you might want to preserve some of that 15% gain with long term cap gain vs short term.
May 5, 2014 @ 7:43 PM
joec wrote:AN wrote:I would
[quote=joec][quote=AN]I would hold hoping for a long term cap gain. All the while, put in a 3-5% stop loss in, so just incase it start to fall, you’re only out 3-5%. All the while, potentially capturing and gain and have the long term cap gain.
If it’s RSU, I’d sell right away, since there’s no tax reason to keep, since you already paid tax when it vests. But w/ ESPP, you haven’t paid tax yet, so you do have an opportunity to save some $ in taxes.[/quote]
Check with a tax adviser, but with ESPP stock, you are usually buying it with AFTER tax dollars so you’ve already paid taxes on it (you used your income to buy it). It’s really just about whether you want to try to qualify for long term capital gains or not and having to hold more of your company stock which you already own a lot of (assuming relative to how much ESPP you can even buy) for 2 years is a VERY risky move…[/quote]
It’s a little more complicated than that, because it depends on whether the sales was qualifying or disqualifying, and whether it’s long or short term…
https://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Employee-Stock-Purchase-Plans/INF12047.html
I think what AN is saying is RSU, income taxes are due the day you vest.. versus with ESPP, no taxes (income or capital gains) until you sell…And for ESPP, how much is considered income versus capital gains (long or short) depends on a few factors..
1. FMV of the stock @ exercise date
2. FMV of the stock @ offering date
3. FMV of the stock @ sales date
4. Date of offering
5. Date of exercise
6. Date of sales.
May 5, 2014 @ 8:13 PM
flu wrote:joec wrote:AN
[quote=flu][quote=joec][quote=AN]I would hold hoping for a long term cap gain. All the while, put in a 3-5% stop loss in, so just incase it start to fall, you’re only out 3-5%. All the while, potentially capturing and gain and have the long term cap gain.
If it’s RSU, I’d sell right away, since there’s no tax reason to keep, since you already paid tax when it vests. But w/ ESPP, you haven’t paid tax yet, so you do have an opportunity to save some $ in taxes.[/quote]
Check with a tax adviser, but with ESPP stock, you are usually buying it with AFTER tax dollars so you’ve already paid taxes on it (you used your income to buy it). It’s really just about whether you want to try to qualify for long term capital gains or not and having to hold more of your company stock which you already own a lot of (assuming relative to how much ESPP you can even buy) for 2 years is a VERY risky move…[/quote]
It’s a little more complicated than that, because it depends on whether the sales was qualifying or disqualifying, and whether it’s long or short term…
https://turbotax.intuit.com/tax-tools/tax-tips/Investments-and-Taxes/Employee-Stock-Purchase-Plans/INF12047.html
I think what AN is saying is RSU, income taxes are due the day you vest.. versus with ESPP, no taxes (income or capital gains) until you sell…And for ESPP, how much is considered income versus capital gains (long or short) depends on a few factors..
1. FMV of the stock @ exercise date
2. FMV of the stock @ offering date
3. FMV of the stock @ sales date
4. Date of offering
5. Date of exercise
6. Date of sales.[/quote]
Exactly. Lets say you were lucky and on top of the 15% discount, your company stock went up and so on exercise date, you’re up 50%+. Are you ready to cash that gain in and pay short term cap gain or do you want to take a risk and hoping it doesn’t crash and wait for that long term cap gain before selling.
May 6, 2014 @ 7:43 AM
Thanks for all the info and
Thanks for all the info and as I said, I haven’t dealt with ESPPs in ages.
Still, all that said, since the fact of the matter is you’re still using your income to purchase these shares vs. them being given to you, I’d still sell (and have in my past when I had them) vs. trying to gamble and hope they go higher or let the tail way the dog with taxes…You had a huge gain in the short term with income dollars, sell, pay the tax and move on is what “I’d do”.
The tax bill, I suppose is of secondary priority and still boils down to trying to wait for either long term or short term gains. The long term gains, I believe is still 2 years from grant date (1 year from exercise) unless they changed the rules so that’s still a long time to wait for my income dollars (again, IMO).
The market risk is too high since, again, I’m assuming most people with ESPP also have RSUs and depend on their company for income/healthcare/etc…
I really don’t need to hold more of my company stock I guess. I remember in my past, I had 95% of my net worth in 1 company. Sold some, but should’ve sold more really.
Also note that if you sell now, tax won’t be due for like a year.
May 6, 2014 @ 10:01 AM
joec wrote:Thanks for all the
[quote=joec]Thanks for all the info and as I said, I haven’t dealt with ESPPs in ages.
Still, all that said, since the fact of the matter is you’re still using your income to purchase these shares vs. them being given to you, I’d still sell (and have in my past when I had them) vs. trying to gamble and hope they go higher or let the tail way the dog with taxes…You had a huge gain in the short term with income dollars, sell, pay the tax and move on is what “I’d do”.
The tax bill, I suppose is of secondary priority and still boils down to trying to wait for either long term or short term gains. The long term gains, I believe is still 2 years from grant date (1 year from exercise) unless they changed the rules so that’s still a long time to wait for my income dollars (again, IMO).
The market risk is too high since, again, I’m assuming most people with ESPP also have RSUs and depend on their company for income/healthcare/etc…
I really don’t need to hold more of my company stock I guess. I remember in my past, I had 95% of my net worth in 1 company. Sold some, but should’ve sold more really.
Also note that if you sell now, tax won’t be due for like a year.[/quote]
I agree with you. I guess it depends on the company you work for I guess and the relative stability of the company… I use to work for a company that did finance software, and they were a pretty stable company so it made sense to hold…
These days, I work at a mobile tech company, and it’s pretty cut throat these days…. based on our competition (or perceived competition)….I guess that’s why I’ve asked what others are doing….
May 6, 2014 @ 1:44 PM
flu wrote:I agree with you. I
[quote=flu]I agree with you. I guess it depends on the company you work for I guess and the relative stability of the company… I use to work for a company that did finance software, and they were a pretty stable company so it made sense to hold…
These days, I work at a mobile tech company, and it’s pretty cut throat these days…. based on our competition (or perceived competition)….I guess that’s why I’ve asked what others are doing….[/quote]You’re right, it really depends on which company you’re working for. But, this essentially describes all stock investment. To sell or not to sell first and foremost, should be decided on whether you expect the stock to go up, stay flat, or crash and burn. If you think it’s the first two, then it’s work holding. While if it’s the later, then sell as soon as you can. The tax is definitely secondary. However, since none of us have crystal ball, this is why I say keep it if you don’t expect it to crash imminently, but have a stop loss in there, just in case it does.
May 6, 2014 @ 4:02 PM
I dumped half and kept half.
I dumped half and kept half. I still have some QCOM shares with a $2.75 basis. 🙂
May 6, 2014 @ 5:49 PM
Having worked in the finance
Having worked in the finance industry and advised clients as well as to what to do with their money, I really think if people can actually predict what a stock will do, you really need to quit your jobs and just manage money.
This is why I keep going back to you are using your income to purchase theses shares (at a discount of course)…
The stock can do anything and honestly, unless you have great inside information (insider trading to a degree no matter what since you work there)…it makes sense to not predict what will happen and just do what makes the most sense financially long term.
I guess my thinking is what the stock does is irrelevant in my mind since I can’t predict the future and company workers are notoriously bullish on their own firms making them blinded I feel…
Either way, some good thoughts and nice to at least partition what really you’re trying to gain (risk/reward). Remember, you can always invest the money you gained and it could do better in other investments and in turn, also lower your risk/investment profile.
May 6, 2014 @ 11:41 PM
joec wrote:Having worked in
[quote=joec]Having worked in the finance industry and advised clients as well as to what to do with their money, I really think if people can actually predict what a stock will do, you really need to quit your jobs and just manage money.
This is why I keep going back to you are using your income to purchase theses shares (at a discount of course)…
The stock can do anything and honestly, unless you have great inside information (insider trading to a degree no matter what since you work there)…it makes sense to not predict what will happen and just do what makes the most sense financially long term.
I guess my thinking is what the stock does is irrelevant in my mind since I can’t predict the future and company workers are notoriously bullish on their own firms making them blinded I feel…
Either way, some good thoughts and nice to at least partition what really you’re trying to gain (risk/reward). Remember, you can always invest the money you gained and it could do better in other investments and in turn, also lower your risk/investment profile.[/quote]Of course no one can predict the direction of stock, but that applies to all stocks, regardless of whether you got it through ESPP or buying it through the open market.
You are correct, it is using income to purchase these share. But the question is, what will you do with the money when you sell? Will you take it and buy something else? How much will you gain with the new stock vs your company’s stock. The risk of decline/increase is equal with all stocks. Like you said, no one can predict the future. But we all know what the tax implication is today.
So, here’s an example. Lets say you make $100k year and the company allow you to put 20% away for ESPP. Which mean each 6 months period, you can put away $10k. Lets also assume that your company increased in stock price and at the time of purchase of the ESPP share, you’re are up 50%. So, your $10k ESPP investment is now worth $15k. Lets assume you’re in a 28% tax bracket, your total short term cap gain tax is 37.25%, or $1862.50. Which mean your net is $13137.50. If you keep it for a year and your stock stayed flat, your net would be $14250. Which means, the new investment you purchase would have to gain ~8.5% more than your company stock, in order for you to break even. The question to you is, how confident are you to pick a new stock that can beat out your company’s stock by 8.5%. If you’re in a higher tax bracket, the % your new stock need to gain would also increase. This is why I tend to prefer to keep the ESPP shares a year while sell my RSU right away. I’m not confident that I can find a new stock that beat out my company’s stock that greatly (this is assuming that your company’s stock is up over the 6 months period).
Now, lets see what it would look like if it’s on its way down. If it’s on its way down, then you’re automatically up 15%. So, your $10k investment is $11500 the time of purchase of the ESPP shares. If you sell right away, your net would be $10941.25, while if you hold it a year and the stock price doesn’t change, your net would be $11275. Which means your new investment from the net sale of your ESPP would have to beat your company’s stock by ~3% to make it worth while. This might be a more obvious time to sell if you think you can do better than 3% over your company’s stock.
This is why I say it all depends on what’s currently going on at your company and what you expect to happen in the future with your company’s stock vs the stock you’re planning to buy with your ESPP proceed. There’s no black and white answer to whether to sell or not.
Now, I don’t deny that you need to diversify. I’m not saying to keep it forever and not diversify. You can always diversify after you sell after 1 year. After a few years, I think you’ll be pretty diversified.
May 5, 2014 @ 6:28 PM
double post
double post
May 5, 2014 @ 11:10 AM
UCGal wrote:It’s part of my
[quote=UCGal]It’s part of my overall investing policy to churn-n-burn. Sell as soon as vested.
I have two (related) reasons for this:
* I don’t want a large position in the company stock because I’ve already tied my financial future with them for a paycheck – I’d like to diversify that money. (Think Enron.)
* I’ve already got a vested outcome in the stock going up with the next cycle of ESPP – I don’t need to extend that position.
Options and RSUs are a different matter. No skin in the game to purchase them. But ESPP – that’s MY money invested.
And color me jealous on the 20% – we only get a 15% discount.[/quote]
Whoops, I think ours was 15% off, up to 20% of your annual salary… I got the numbers mixed up… I never bothered to look. The current market price though is still 36% above the purchase price though…lol… Ok folks convinced me… Sell….
May 6, 2014 @ 7:59 AM
flu wrote:
Whoops, I think
[quote=flu]
Whoops, I think ours was 15% off, up to 20% of your annual salary… I got the numbers mixed up… I never bothered to look. The current market price though is still 36% above the purchase price though…lol… Ok folks convinced me… Sell….[/quote]
Still a better deal than we get – we’re limited to 10% of our salary. And worse than that – the stupid interface makes you enter a $ amount per paycheck. Even to the $… no cents. So if merit increases, or promotions come along – you don’t get the bump in the ESPP. (I have NO idea why they don’t let us enter a percentage of gross pay NOR why bonuses are not included in the ESPP program…. very frustrating.)
May 1, 2014 @ 1:02 PM
If you are part of an ESPP
If you are part of an ESPP plan, what do you do typically do with your ESPP shares?
Do you sell immediately, as soon as you vest?
Or do you hang on to them for to try to get the long term capital gains?
Or do you do a combination thereof?
I’m looking at some recent ESPP shares that were discounted 20% off the FMV a few months back when my company’s stock took a hit. The purchase price was determined to be 20% off a low fair market price…. The stock has recovered more or less (almost), and the shares have vested.. Selling immediately would return about 36.4% in 6 months…I could try to hang on for 2 years
Company prospects are…. well let’s just say it’s no Apple or Google high flyer…And it’s pretty cut-throat…
I’m leaning toward dumping especially since we’re heading into May/June, and especially since the markets in general have been flat so far this year (maybe 5-6% if you follow the indexes)….I don’t see a 30-40+% gain this year in the market this year like last…. Hanging on for long term cap gains, to me seems highly riskier in this environment..
What do you typically do?
May 6, 2014 @ 8:31 PM
Well thanks everyone.. I
Well thanks everyone.. I ended up selling some today. Saved about $1500 before things got really hairy this afternoon when Nasdaq went down further…
Internet virtual beers for everyone on me…. 🙂
May 7, 2014 @ 7:16 AM
flu wrote:Well thanks
[quote=flu]Well thanks everyone.. I ended up selling some today. Saved about $1500 before things got really hairy this afternoon when Nasdaq went down further…
Internet virtual beers for everyone on me…. :)[/quote]Hope you didn’t take that proceed and buy GOOG :-).
May 7, 2014 @ 8:46 AM
I think the reason we have
I think the reason we have different views on this AN is because I view the ESPP as not an investment. I look at it purely as FREE bonus money.
Again, I’ve been in everyone’s shoes with ESPPs at multiple startups/companies and have gone through that in the past, but that doesn’t change my views still since in the end, the gain isn’t that big between the two of keeping it just for the tax gain vs. the high risk of holding something for 2 years/1 year. Look at TWTR as an example. If you sold immediately yesterday, you’d be selling at 35 (sell right away). Do you really want to play such volatility and now, wait another 1 or 2 years depending on when you joined the company?
Not to mention, the gut wrenching during that time as to what to do.
The tax implications in my mind are really just secondary…
As we both agree, no one can know what will happen with the stock and what a new investment will do. To me, it’s not even about whether I can pick something else. Maybe I will just sit on the cash.
It all boils down to me viewing ESPP as FREE money and a bonus. It’s a 100% guaranteed gain of about 18% which can result in a loss if you hold it. I just don’t play that with my money or client’s money since most employees are already heavily weighed in their own companies shares. Like if you are a millionaire at TWTR with your stock options or RSUs, do you really need to eek out a few more thousands from ESPP tax benefits?
Similar to me never buying my company stock with cash on the open market, I’m just not that risk taking when it comes to my own income to put even MORE of my net worth in the company I work for.
Also, I really feel people working for the place they work tend to be too bullish.
May 7, 2014 @ 12:42 PM
joec wrote:I think the reason
[quote=joec]I think the reason we have different views on this AN is because I view the ESPP as not an investment. I look at it purely as FREE bonus money[/quote]I guess this is the crux of our differences. I view it as investment AND a bonus while you see it purely as a bonus. Because I view it as an investment as well, tax does come into play wrt when to sell. If you view it purely as a bonus, then of course, sell ASAP.
BTW, while you can point to TWTR, I can also point to QCOM or AAPL or GOOG. I can go on and on. But at the end of the day, the crux of our differences is how we view the 15% discount.
May 9, 2014 @ 1:49 PM
I was planning to hold my
I was planning to hold my company ESPP for the long capital gain, but holding it three more months made me losing $$$$$ already as the stock dropped like a rock after a flying up earlier this year. So I just sold them to bag a tiny gain and prevent loss.
May 9, 2014 @ 2:16 PM
NicMM wrote:I was planning to
[quote=NicMM]I was planning to hold my company ESPP for the long capital gain, but holding it three more months made me losing $$$$$ already as the stock dropped like a rock after a flying up earlier this year. So I just sold them to bag a tiny gain and prevent loss.[/quote]This is why I tend to have a stop loss in place. That way, if $hit hit the fan, you’re protected.