Another ESPP question

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Topic Author
Kielke
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Another ESPP question

Post by Kielke »

Alright, so two things have happened in rather quick succession, (oddly in somewhat quick succession after getting my job as well). One starting soon, is the enrollment period for my Mega Companies Employee Stock Purchase program, of which after getting a percent of my paycheck withdrawn for 6 months, they buy the shares for me on the last day of the term for me at a 15% discount of the trading price. My understanding is they vest a week later and I can do what I wish with them at that point in time. Secondly my company decided they really liked the work I have been doing, and wanted to show their appreciation by way of a just over 2% raise.

I told myself I did not want participate in the ESPP for at least several years until I had more of my ducks in a row, but the 15% discount is just staring at me as an almost free money sense of things. Granted I know this is the stock market and more than 15% can vanish in a trading day ( or less), I was considering putting some money towards this for a down payment on a house in the future.

My supposed plan is of that 2% raise, send 1% to my 401K, and the next 1% towards the ESPP, that way I am basically banking my raise, and still living on what I used to be. I do not make nearly enough to reasonably max out my 401K at this time, and the company match does not start for almost another year, though I am already in the habit of saving over double the amount that is getting matched. In addition putting an extra $100 a month towards a Roth IRA (and any additional found money I can scrape up).

While this year it will not happen, but each year between my job and a few small side income streams I have, I keep on getting closer and closer to the 25% tax bracket (after deductions). While part of me tells me to not do ESPP until I have a fully funded Emergency fund, and a very good chunk of change towards a car replacement fund. What does the Bogle head community think?

1) Turn down the "free money" and send that 1% towards my E-fund until it is established?
2) Put the 1% towards the ESPP, and call it a day and keep on ramping up my E-fund as I had originally planned?
3) Put at least 1% towards the ESPP and 2 or 3 if I can squeeze my budget enough?
Bob's not my name
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Re: Another ESPP question

Post by Bob's not my name »

The ESPP is free money. Don't put just 1% in. Max it at 10% or 15%, whatever your employer allows. Where else can you get a 90% annualized return?

As long as you sell immediately, the ESPP is merely a cash flow pipe, and not an investment, so it shouldn't affect your 401k contributions once you've weathered the first six-month period.
dimdum
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Re: Another ESPP question

Post by dimdum »

If you are working for a mega for SP100 company, the stock should be mostly following market. The company invest on your behalf for 6 months and then give you discount of 15% over start or ending stock price. The stocks is transferred to your brokerage account usually within 2-3 days once its allocated. You can sell immediately and make 15% gain. You risk is during that short duration when stock is being moved. You can go full 10% contribution, sell every 6 month with limited risk.
Bob's not my name
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Re: Another ESPP question

Post by Bob's not my name »

dimdum wrote:You can sell immediately and make 15% gain.
It's a 15% discount, so the gain is not 15% it's 17.6%. Annualized, that's over 90%.
Topic Author
Kielke
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Re: Another ESPP question

Post by Kielke »

Not quite sure how you are getting 90% a year, but maybe that is because I did not fully explain the plan, there are two 6 month holding periods a year, and at the end of each one they buy shares with the amount accumulated over that time. so at most there would be two sales a year.

Secondly If I had more money to spare I would be throwing a heck of a lot more at this then I already do. As it currently stands I am banking a little over 30% of my income, with most of the rest going to housing and food, and the few hobbies I am forcing myself to make time for. Plus with only about 2 months cushion in cash, with an aging car, it sounds like gambling to cut my monthly cash flow by that much simply hoping to cash out in half a year at even a 15% gain. After I get a FF emergency fund that game sounds far far more likely, and a lot less risky.
Bob's not my name
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Re: Another ESPP question

Post by Bob's not my name »

Your money is tied up for an average 3 months.

(1.176**4) -1 = 91%

Where's the 30% going? As I said, the ESPP is merely a six-month cash flow pipe. You put money in at one end and more money comes out the other end six months later, then you invest it. Shouldn't crimp your lifestyle at all once you've weathered the first six-month plan period. It's just a paycheck that comes biannually instead of biweekly (intentional irony on what the prefix bi means).
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Kielke
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Re: Another ESPP question

Post by Kielke »

Bob's not my name wrote:Your money is tied up for an average 3 months.

(1.176**4) -1 = 91%

Where's the 30% going? As I said, the ESPP is merely a six-month cash flow pipe. You put money in at one end and more money comes out the other end six months later, then you invest it. Shouldn't crimp your lifestyle at all once you've weathered the first six-month plan period. It's just a paycheck that comes biannually instead of biweekly (intentional irony on what the prefix bi means).
The 30% is about 15% to each 401k and Emergency fund and a little bit extra to the Roth IRA. My E-fund is far too low when you consider the age of my car, at this point in time it puts me in a very precarious situation. Honestly there is one thing I do not want to do and that is gamble with my emergency fund, and face it that is what this is doing in some sense of the word. I may not have been investing nearly as long as most people on this forum, but I have certainly seen some incredibly volatile markets in the past 7 years, having seen probably more massive single day drops in major stock market indexes than most people would probably have expected to see in an average life time.
MIretired
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Re: Another ESPP question

Post by MIretired »

#1 -emergency fund. enough for likely known nearing emergencies, with some to spare.
#2 - you should back off on retirement savings completely, except that amount needed to get full company matching money until EM funded.
#3 - can you enroll in ESPP without any contributions? 2nd choice: The brokerage it's held in will charge $8-10 or more whenever you sell this stock. Put a 1-2% if you have to now, making sure it's enough to still make a profit after selling it almost immediately after receiving it.
This is really fun money/investing--not an investment, it has risk. Sell often, and don't accumulate much there.
#4 - you don't have a company match on 401k for 1 year yet, almost. After EM fund is OK, you should do a TradIRA to reduce income below 25% bracket, or ROTH if already below.
After company match, do 401k up to match, then ROTH to max, then more 401k(or TradIRA.)
You should save for house down payment with/instead of retirement as you wish--after EM fund.
You could contribute to savings directly from sales of co. stock. Of course, savings for shorter goals -- house-- are in short-term instruments, NOT stocks or stock funds.

Mostly from Dave Ramsey or M*.
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Kosmo
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Re: Another ESPP question

Post by Kosmo »

Since you aren't getting a match in the 401k, I'd cut the contribution to that and funnel that money to the ESPP. Like someone else said, it's really just a pipe that spits out a 17.6% return a few months later. Using an ESPP is almost like getting an employer match in the 401k...free money, with the caveat that the money you put in is tied up for a while.
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roymeo
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Re: Another ESPP question

Post by roymeo »

Question: Do you get a lock-in price when you join the program that lasts for some period of time, or do you really just get 15% off the purchase price every 6 months?

(Math below ignores the fact that the saving as amortized over 6 months for sanity's sake.)

The ESPP plan I have at work (which I believe is pretty standard) gives us a lock-in price based on when we enroll that lasts for 2 years, and purchases are made every 6 months. We get a 15% discount off of that lock-in price, unless the stock price has gone down when it's time to purchase, in which case we get that price as a new 2 year lock-in price and get the shares at a 15% discount from that. So we're always guaranteed a purchase price that is AT LEAST 15% less than the current stock price. And it often can be much more. The company stock was pretty low 2 years ago (lock in price X) and the stock price at today is about 2.25*X. So the gain there isn't anything like a paltry 15%. I'm paying 0.85*X for something worth 2.5*X; a 165% payoff (if my math is correct) for holding the company stock for the 2-5 days it takes to get it into the account and sell it off.

So I've maxed out. Even at 15%, that's a LOT of brown bag lunches (or other saving mechanism) over time...probably a lot more than 6 months worth of scrimping.

I had one co-worker suggest it is better to carry some cheap credit-card debt to get started at a high level in the plan, as you CAN drop out or reduce your % (in our plan) without affecting your lock-in amount, but if you raise it ("Wow the stock just tripled, I want more ESPP!") you lose your lock-in.

roymeo
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Kielke
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Re: Another ESPP question

Post by Kielke »

MIpreRetirey wrote:#1 -emergency fund. enough for likely known nearing emergencies, with some to spare.
#2 - you should back off on retirement savings completely, except that amount needed to get full company matching money until EM funded.
#3 - can you enroll in ESPP without any contributions? 2nd choice: The brokerage it's held in will charge $8-10 or more whenever you sell this stock. Put a 1-2% if you have to now, making sure it's enough to still make a profit after selling it almost immediately after receiving it.
This is really fun money/investing--not an investment, it has risk. Sell often, and don't accumulate much there.
#4 - you don't have a company match on 401k for 1 year yet, almost. After EM fund is OK, you should do a TradIRA to reduce income below 25% bracket, or ROTH if already below.
After company match, do 401k up to match, then ROTH to max, then more 401k(or TradIRA.)
You should save for house down payment with/instead of retirement as you wish--after EM fund.
You could contribute to savings directly from sales of co. stock. Of course, savings for shorter goals -- house-- are in short-term instruments, NOT stocks or stock funds.

Mostly from Dave Ramsey or M*.
MIpreRetirey,

Thank you for your advice, one of the more sensible people on this forum, even as a math guy, I know enough about math to know it is never all about math. I really should cut back on my 401K contributions until the company match kicks in, just so I can give my savings a steroid boost. I think this first 3-4 months of the ramped up amount was just to tell myself that yes I could do it when I had to, as never seeing that cash is nice because it is not even a fall back if I over spend. But as I have realized I can somewhat safely stay in my budget at these elevated rates it is nice.

In the portfolio help thread I put together, I actually did have many people recommend my 401k (in roth version when possible) for my main retirement investment, because I am lucky to have a plan that offers every Vanguard Institutional fund (with incredibly low ER to match) I could need, and a few more.

(I am assuming the MI stands for Michigan? I am a current Lansing Native now).

roymeo wrote:Question: Do you get a lock-in price when you join the program that lasts for some period of time, or do you really just get 15% off the purchase price every 6 months?

(Math below ignores the fact that the saving as amortized over 6 months for sanity's sake.)

The ESPP plan I have at work (which I believe is pretty standard) gives us a lock-in price based on when we enroll that lasts for 2 years, and purchases are made every 6 months. We get a 15% discount off of that lock-in price, unless the stock price has gone down when it's time to purchase, in which case we get that price as a new 2 year lock-in price and get the shares at a 15% discount from that. So we're always guaranteed a purchase price that is AT LEAST 15% less than the current stock price. And it often can be much more. The company stock was pretty low 2 years ago (lock in price X) and the stock price at today is about 2.25*X. So the gain there isn't anything like a paltry 15%. I'm paying 0.85*X for something worth 2.5*X; a 165% payoff (if my math is correct) for holding the company stock for the 2-5 days it takes to get it into the account and sell it off.

So I've maxed out. Even at 15%, that's a LOT of brown bag lunches (or other saving mechanism) over time...probably a lot more than 6 months worth of scrimping.

I had one co-worker suggest it is better to carry some cheap credit-card debt to get started at a high level in the plan, as you CAN drop out or reduce your % (in our plan) without affecting your lock-in amount, but if you raise it ("Wow the stock just tripled, I want more ESPP!") you lose your lock-in.

roymeo
From the reading I have done it is a 15% discount as of the (closing?) price on the last day of the 6 month withholding period. But I can enroll at the beginning of any 6 month withholding period.

This is a general aside about the Bogleheads, I think this forum has a lot of great advice, but so many of you seem to like to gamble especially when the game is rigged in your favor. A thing to remember is even well run Casino's (read as those with the odds always stacked in their favor) fail if they do not properly account for the risk they do take on. I mean with the possibility of things like this: http://en.wikipedia.org/wiki/2010_Flash_Crash What seems like a simple act of patience can quickly turn into a loosing monetary proposition of stupidity. I am sorry I really do not want to gamble 10-15% of my salary. I know there are ways with trading to protect against a Flash Crash like scenario. But still who says next time it does not recover somewhat quickly? Or say you buy the shares at a guaranteed price, and the required holding time before they are deposited, and able to be sold is similar to the start of the next great Financial crisis? Or do I need to quote Collapses of entire companies, what if that happens with my company around the time the shares are bought? (Granted far more to worry about than just 10-15% of my salary, but at least then I would *have* that 10-15% of my salary.)
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hansp
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Re: Another ESPP question

Post by hansp »

I agree w/ the responses above. I would do everything I could to max out the ESPP contribution. I have had one in the past, and as long as you sell right away, this is the closest thing to free money you are going to have. (Even 401k matches are locked away until retirement age). For your car, are you worried about upcoming repairs or replacement? If it's replacement and you have to do it in the first 6 month ESPP period, you could even do a low interest car loan to bridge the gap until you cash in.

In my experience, it's only the first 6 months that are "hard". After that, as was previously mentioned, you can bank the first sale in your emergency fund and just keep going.
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Re: Another ESPP question

Post by Jfet »

What you are describing is what happened to me and is why I wanted to buy weekly puts before the shares were deposited to protect against a Friday/Monday gap down. I didn't buy the puts and it did gap down 10% (figures).

You could check your company policy and see if there is anything prohibiting you from buying weekly puts during the week that they will be purchasing your shares at a 15% discount. Probably something like $200 to protect $15,000.

My company did have some wording that made me concerned about hedging but maybe yours doesn't.
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Kielke
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Re: Another ESPP question

Post by Kielke »

Jfet wrote:What you are describing is what happened to me and is why I wanted to buy weekly puts before the shares were deposited to protect against a Friday/Monday gap down. I didn't buy the puts and it did gap down 10% (figures).

You could check your company policy and see if there is anything prohibiting you from buying weekly puts during the week that they will be purchasing your shares at a 15% discount. Probably something like $200 to protect $15,000.

My company did have some wording that made me concerned about hedging but maybe yours doesn't.
My company is fairly adamant that the only way I could really ever consider trading in my Company stock, is through Indexes (i.e. I get theirs and a hell of a lot of others), or through the ESPP, all else will be considered at risk of insider trading should something occur to raise those flags.
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Re: Another ESPP question

Post by Jfet »

Kielke wrote: My company is fairly adamant that the only way I could really ever consider trading in my Company stock, is through Indexes (i.e. I get theirs and a hell of a lot of others), or through the ESPP, all else will be considered at risk of insider trading should something occur to raise those flags.
Yeah I figured as such. It is unfortunate since it is in no way insider trading...you just don't want to take a risk that on Friday night they deposit shares into your account and on Saturday the company reveals the CFO embezzled $500,000,000 causing the Monday price to open 60% lower.

As you said, Bogleheads do take risk even when they seem to be advocating wise financial moves.
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roymeo
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Re: Another ESPP question

Post by roymeo »

Kielke wrote: This is a general aside about the Bogleheads, I think this forum has a lot of great advice, but so many of you seem to like to gamble especially when the game is rigged in your favor. A thing to remember is even well run Casino's (read as those with the odds always stacked in their favor) fail if they do not properly account for the risk they do take on. I mean with the possibility of things like this: http://en.wikipedia.org/wiki/2010_Flash_Crash What seems like a simple act of patience can quickly turn into a loosing monetary proposition of stupidity. I am sorry I really do not want to gamble 10-15% of my salary. I know there are ways with trading to protect against a Flash Crash like scenario. But still who says next time it does not recover somewhat quickly? Or say you buy the shares at a guaranteed price, and the required holding time before they are deposited, and able to be sold is similar to the start of the next great Financial crisis? Or do I need to quote Collapses of entire companies, what if that happens with my company around the time the shares are bought? (Granted far more to worry about than just 10-15% of my salary, but at least then I would *have* that 10-15% of my salary.)
Only you know your own risk tolerance.
Consider that you're talking about a percentage/2 (cause it happens 2x a year) of your pay which is vulnerable to an unlikely event which has to occur 'only' to your company's stock within a short time window from when you've purchased it at a 15% discount to when you can get it sold (2-5 days in my experience). I say 'only' to your company's stock, because if it's a general stock market decline you'll be exposed to it via whatever part of your portfolio is invested in the general stock market which is likely to be greater than 1/2 of the percentage of your pay that you put into the ESPP annually. Sure there's a chance that your company completely stumbles between buy and sell date....but saying "What if there's a Flash Crash that lasts a long time" would apply to your equity portion of your portfolio, as well. You already start with AT LEAST a 15% discount so you'll need a "Flash Crash * 1.67" to fall to your break-even point.

Compare that to the much more common "Well I've been putting all this money into my ESPP and buying my options ASAP for 5 years" that we usually hear on this topic and you'll maybe see why the chance that you catch something by selling asap is very small.

You're right to point out that there isn't any risk at all. But I think that your logic where you're worried about this amount of money while the rest of the financial world is crumbling at your feet is a little overblown. I'm not sure that this is risk-tolerance instead of neurosis. :)

roymeo
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Topic Author
Kielke
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Re: Another ESPP question

Post by Kielke »

roymeo wrote:
Kielke wrote: This is a general aside about the Bogleheads, I think this forum has a lot of great advice, but so many of you seem to like to gamble especially when the game is rigged in your favor. A thing to remember is even well run Casino's (read as those with the odds always stacked in their favor) fail if they do not properly account for the risk they do take on. I mean with the possibility of things like this: http://en.wikipedia.org/wiki/2010_Flash_Crash What seems like a simple act of patience can quickly turn into a loosing monetary proposition of stupidity. I am sorry I really do not want to gamble 10-15% of my salary. I know there are ways with trading to protect against a Flash Crash like scenario. But still who says next time it does not recover somewhat quickly? Or say you buy the shares at a guaranteed price, and the required holding time before they are deposited, and able to be sold is similar to the start of the next great Financial crisis? Or do I need to quote Collapses of entire companies, what if that happens with my company around the time the shares are bought? (Granted far more to worry about than just 10-15% of my salary, but at least then I would *have* that 10-15% of my salary.)
Only you know your own risk tolerance.
Consider that you're talking about a percentage/2 (cause it happens 2x a year) of your pay which is vulnerable to an unlikely event which has to occur 'only' to your company's stock within a short time window from when you've purchased it at a 15% discount to when you can get it sold (2-5 days in my experience). I say 'only' to your company's stock, because if it's a general stock market decline you'll be exposed to it via whatever part of your portfolio is invested in the general stock market which is likely to be greater than 1/2 of the percentage of your pay that you put into the ESPP annually. Sure there's a chance that your company completely stumbles between buy and sell date....but saying "What if there's a Flash Crash that lasts a long time" would apply to your equity portion of your portfolio, as well. You already start with AT LEAST a 15% discount so you'll need a "Flash Crash * 1.67" to fall to your break-even point.

Compare that to the much more common "Well I've been putting all this money into my ESPP and buying my options ASAP for 5 years" that we usually hear on this topic and you'll maybe see why the chance that you catch something by selling asap is very small.

You're right to point out that there isn't any risk at all. But I think that your logic where you're worried about this amount of money while the rest of the financial world is crumbling at your feet is a little overblown. I'm not sure that this is risk-tolerance instead of neurosis. :)

roymeo
Roymeo, Thank you for your further comments. Let me just say I am not adverse to doing such a thing in the future. In fact it very much is one of the smarter ways to go about handling the ESPP. I think this is one of those instances where sometimes the smartest choice leaves far to much risk on the table. Now talk to me when I have a fully funded Emergency fund, and a bit extra to spare. I can suddenly see myself feeling far more free to do this. And Yes I knew when I was coming up with the list that in the whole scope of things they are few and far between. But few and far between is not never.

I will also say I am debt-phobic, I have raised to be that way, and I really like being that way. So while even with a calamity and only getting a 3-5% return on the money invested as opposed to the full 15% (not doing annualized for simplicity), is still far better returns than I could get in a savings account, should something go wrong, and I am forced to take out debt, that even at these low interest rates can quickly eat into that 3-5% return, especially if the debt needs to be taken out early on in the 6 month window. It is just something I'd like to avoid. But like I said give me a much larger cash cushion to weather storms more easily, and I may be willing to spin this wheel endlessly.
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Re: Another ESPP question

Post by Easy Rhino »

If I understand, your ESPP has no lookback period, right? The discount is based only on the last day of the period, never the first day? (a lookback would make it even more generous).

So, all of the risk is contained in the week or two it would take between the time the price of your shares are set and when you could execute a sale. And the risk is only against the amount you've put into it for six months.

If you put as much as you can into the ESPP so long as you can still pay your bills, then even if the company stock goes down a lot in those two weeks, it still won't be a game breaker for you.

The true hard part might be managing cash flow for those six months.
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Dutch
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Re: Another ESPP question

Post by Dutch »

I wish I had access to an ESPP like that.

From your responses it sounds like you are too conservative for your own good.
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Re: Another ESPP question

Post by covertfantom »

You're being far too conservative. Where do you keep your emergency fund right now? What's to say that there isn't some 70s era rapid inflation that eats that cash up overnight? Perhaps a virus infects all of the major financial institutions simultaneously and the $$ in your bank account becomes $0. If you're paranoid enough, you can come up with any number of scenarios where you will lose your shirt. I think it's much better to be pragmatic.

With my ESPP, I believe they give us the option to withdraw from the plan at any time. If you have a similar option, that would confine your 'risk' to just the week you're waiting for it to vest.
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Re: Another ESPP question

Post by roymeo »

And I'll say I was more arguing the general case for the ESPP, not tailoring my response to the OP's situation with needing to grow an emergency fund, etc.

I'll admit I slowly came around to my current understanding, I don't believe I maxed out my initial ESPP offering and I also had a 'lost month' where instead of issuing an immediate sell, I set a price just up a touch from the buy price and then the stock did go down and experienced all the craziness of 'but I don't want to sell at a loss', 'it's got to go back up, we're doing good', etc. and it took a month for the price to go back up to the buy price (got lucky).

roymeo
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Yossarian
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Re: Another ESPP question

Post by Yossarian »

The Fatwalleter in me would be pumping as much money through this as possible.
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tyrion
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Re: Another ESPP question

Post by tyrion »

Hi. I'm resurrecting this old thread as it mostly applies to me with one (significant) variable.

My company is just now starting an ESPP offering.
6 month investment periods
0-10% of base pay can be elected
15% discount at the end of the investment period
18 month minimum holding period

With no holding period it would be a no-brainer to me to do the full 10%. With an 18 month holding period, I'm not so sure.

I'd love to hear opinions.
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Re: Another ESPP question

Post by dowse »

At one time, I devoted less than the 10% salary my company allowed, then realized I was leaving money on the table. To me, it's a no-brainer to take full advantage if there is any possible way you can manage the temporary cash flow reduction. There is no way to beat this return IF - you follow a strategy of flipping the shares as soon as you can get your hands on them every single time. The only way you could lose is if your company's stock is in a free fall and it takes a day or two to get access to the shares (possible, but unlikely). What I like to do with mine is to place a limit order to sell with a trailing stop loss set at about 2% below the current market price. I usually wind up making a few extra bucks that way.
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Re: Another ESPP question

Post by Jack FFR1846 »

I've worked for companies with the same system. The buy price was 85% of the last day of the period and it took about a week to settle and be available to trade. I thought of it this way....if the stock dropped 15% in that week, I was even. If it didn't drop at least 15%, I was ahead. As mentioned, only the first buying period costs you anything. Once beyond that, you're taking the money out and it's going right back into the tube.

One caviat.....be very aware of when the period runs. I worked for one company where I didn't pay attention and the price fell out of the sky. By the time I realized that was actually enrolled in the ESPP (new job, I just forgot), it had dropped from my buy price of 48 to 12. Not a ton of money, but a lesson to pay attention.
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Re: Another ESPP question

Post by Longtimelurker »

Bob's not my name wrote:The ESPP is free money. Don't put just 1% in. Max it at 10% or 15%, whatever your employer allows. Where else can you get a 90% annualized return?

As long as you sell immediately, the ESPP is merely a cash flow pipe, and not an investment, so it shouldn't affect your 401k contributions once you've weathered the first six-month period.
This is correct.
Stay the course. If you can't resist greed, and fear is proven to be 2x as strong, you are doomed as an investor.
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Re: Another ESPP question

Post by roymeo »

tyrion wrote:Hi. I'm resurrecting this old thread as it mostly applies to me with one (significant) variable.
Hello tyrion. One significant variable change, eh? Let's see if I can encourage some people to notice that.

tyrion wrote: My company is just now starting an ESPP offering.
6 month investment periods
0-10% of base pay can be elected
15% discount at the end of the investment period
18 month minimum holding period

With no holding period it would be a no-brainer to me to do the full 10%. With an 18 month holding period, I'm not so sure.

I'd love to hear opinions.
That is a tough one.

I'd certainly make sure I had other, more diversified, options already taken care of before I gambled in this way. Considering a 1.5 year holding period in there, 15% discount really doesn't get you anything secure. Sure, there is a 15% discount over buying the company stock yourself, but I'd rather not ride that rollercoaster either way--company does well and employees are happy++, company does bad and everyone's extra grouchy.

Though I can't guarantee myself a 15% return with my own money in 1.5 years, neither can I guarantee any return or sleep at all with a significant portion in my company's stock.

I could be swayed, depending on the company...if it were something large and solid with little movement in the stock.

Heck, I was swayed to buy everything on my way out of my first employment situation. After a mostly downward rollercoaster ride I got lucky that when I really needed the money I'd gambled (thinking it was investing) a buyout happened with enough gain to buy a pizza after expenses.

You could be leaving money on the table--but it's attached to the sort of risk that I'm not interested in.

Good luck, I'm also interested in what others have to say about your 18 month holding period...

roymeo
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Re: Another ESPP question

Post by Bob's not my name »

The holding period not only introduces risk, it also substantially reduces the return even if the stock price is stable. With no holding period, the guaranteed annualized gain is over 90% because you get a 17.6% return on money invested for an average 3 months. With an 18-month holding period, your average investment period is 21 months. So the annualized return due to the discount is:

(1 + .176)**(12/21) - 1 = 9.7%

If I could make an extra 10% on a CD I would do it. If I could make an extra 10% on the Total Stock Market Index, regardless of whether the market went up or down, I would do it. But with a single stock you have to balance the 10% increment with the risk and volatility of a single stock, moreover the stock of a firm the success of which already weighs heavily on your personal financial security.

A second issue is that when there is no holding period you never have more than 5% of your annual salary tied up in the plan. An 18-month holding period, if you invest the max every investment period, results in a maximum of 20% of your annual salary. Of course this issue can be addressed by not investing the maximum allowed, but it's important to recognize that the holding period can also increase the amount at risk.
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Re: Another ESPP question

Post by tyrion »

Thanks all (and special thanks to Roymeo and not-Bob),

The holding period is definitely a factor.

20% of my annual salary is a substantial chunk of taxable savings, but just a few percentage points of overall portfolio. So I guess I'm not too worried about single stock risk. I'll probably start at 5% or so and hope to ramp up each period.
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Re: Another ESPP question

Post by inbox788 »

Even with the holding period, I'd max it out. You want to hold it 12 months anyway to get the lower LTCG. Once you invested 18 months, you can start selling the FIFO. Assuming the 9.x% is about right for the return, you're taking a risk for the first 18 months, and after that, you're getting almost guaranteed 9.x% return. In the long run, stocks are expected to go up, so there's little chance you'll lose much unless your company stock is very volatile. I wouldn't have any reservations doing it for any major megacorp (i.e. S&P500 or equivalent), and would probably do it up to 25% of my investment in any RUT2000 stock. Heck, as long as it's a real company listed in NYSE/NASDAQ, it's a decent bet. If I was that concerned about the company, I'd be even more concerned about my job.
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Re: Another ESPP question

Post by Bob's not my name »

inbox788 wrote:You want to hold it 12 months anyway to get the lower LTCG.
This is both incorrect and inadvisable. tfb covers both points in his article: http://thefinancebuff.com/employee-stoc ... pp-is.html
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Re: Another ESPP question

Post by inbox788 »

Bob's not my name wrote:
inbox788 wrote:You want to hold it 12 months anyway to get the lower LTCG.
This is both incorrect and inadvisable. tfb covers both points in his article: http://thefinancebuff.com/employee-stoc ... pp-is.html
I respectfully disagree with the advice given. Also, I believe it's an old article when LTCG required 18 months, not the current 12 months. The 18 month holding period should overlap with the 12 months tax treatment; does the 18 months begin with purchase? If so, they'll be eligible for long term gains the day they're available for sale. So it might not be a choice to immediate sell after 6 months in the program anyway. In a way, the holding period is actually a benefit to the employee. Either way, the two issues are independently beneficial, and both should be pursued in my opinion.

If there were no holding period, I'd STILL hold it for the LTCG. Yes, you could lose if the company stock price drops in the first 12 months after the initial 6 month period, BUT beyond that, you'd always be savings the difference between LTCG and STCG tax, which is around 20% of the gain. Plus as much as you could loose 3% or more or less, you could just as easily GAIN 3% or more or less in the same time period, so my expected return from holding it is about zero.
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Re: Another ESPP question

Post by tfb »

inbox788 wrote:
Bob's not my name wrote:
inbox788 wrote:You want to hold it 12 months anyway to get the lower LTCG.
This is both incorrect and inadvisable. tfb covers both points in his article: http://thefinancebuff.com/employee-stoc ... pp-is.html
I respectfully disagree with the advice given. Also, I believe it's an old article when LTCG required 18 months, not the current 12 months. The 18 month holding period should overlap with the 12 months tax treatment; does the 18 months begin with purchase? If so, they'll be eligible for long term gains the day they're available for sale. So it might not be a choice to immediate sell after 6 months in the program anyway. In a way, the holding period is actually a benefit to the employee. Either way, the two issues are independently beneficial, and both should be pursued in my opinion.

If there were no holding period, I'd STILL hold it for the LTCG. Yes, you could lose if the company stock price drops in the first 12 months after the initial 6 month period, BUT beyond that, you'd always be savings the difference between LTCG and STCG tax, which is around 20% of the gain. Plus as much as you could loose 3% or more or less, you could just as easily GAIN 3% or more or less in the same time period, so my expected return from holding it is about zero.
Here's an example:

Price at the start of the offer period = $100
Price at the end of the purchase period = $100
Your purchase price = $85
No holding period required

Strategy A: Hold 12 months
Price after 12 months = $110
LTCG: $110 - $100 = $10
W-2 income = $15

Strategy B: Sell immediately; diversify into VTI
W-2 income = $15
STCG = $0
12 months later: unrealized gains in VTI, no tax

You see between (A) and (B) you achieved nothing assuming the single stock performed inline with VTI in those 12 months. The discount is always W-2 income. Holding for qualified disposition only helps when you have a look-back AND the price at the start of the offer period was very low.

18 months in the article was based on six-month purchase period which started the offer period. Qualified disposition requires 2 years since the start of the offer period.
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Re: Another ESPP question

Post by Easy Rhino »

tyrion wrote: 18 month minimum holding period
Wait, are you SURE it has a 18 month minimum holding period?

6 month purchase period plus 18 months happens to equal the 2 year window in which you can wait to get favorable income tax treatment from the IRS if the stock price goes down.

But maybe your plan allows you to sell sooner? (under which you book the full "discount" as regular income even if the stock price declines from your purchase price when you sell)
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Re: Another ESPP question

Post by inbox788 »

tfb wrote:Here's an example:

Price at the start of the offer period = $100
Price at the end of the purchase period = $100
Your purchase price = $85
No holding period required

Strategy A: Hold 12 months
Price after 12 months = $110
LTCG: $110 - $100 = $10
W-2 income = $15

Strategy B: Sell immediately; diversify into VTI
W-2 income = $15
STCG = $0
12 months later: unrealized gains in VTI, no tax

You see between (A) and (B) you achieved nothing assuming the single stock performed inline with VTI in those 12 months. The discount is always W-2 income. Holding for qualified disposition only helps when you have a look-back AND the price at the start of the offer period was very low.

18 months in the article was based on six-month purchase period which started the offer period. Qualified disposition requires 2 years since the start of the offer period.
Thanks for the example! On initial reading, it seems to make sense and supports against holding a single stock. The market/VTI has similar chance of up/down as an individual stock, but has the benefit of diversification, so expect less volatility, which is a good thing. I'll have to study it a bit more to convince myself I've been backwards on this all this time.
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Re: Another ESPP question

Post by roymeo »

Working in tech/software, I personally haven't ever worked for a company where I had confidence in waiting around for LTCG.

(And I've worked for some solid old companies, like Kodak. :) )
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Re: Another ESPP question

Post by tyrion »

So in my specific situation, I do have the 18 month holding period. (I'm absolutely sure).

tfb said: Qualified disposition requires 2 years since the start of the offer period.

I also happen to be (for now, at least) in the 15% tax bracket, so any LT capital gains are at 0% federal rates (I know this may potentially change in the future).

But under current law, if I hold everything for 2 years from the start of the offer period (which I need to do anyway, 6 months + 18 months), does that mean I get LT capital gains treatment when I sell?
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Re: Another ESPP question

Post by dbr »

tyrion wrote:So in my specific situation, I do have the 18 month holding period. (I'm absolutely sure).

tfb said: Qualified disposition requires 2 years since the start of the offer period.

I also happen to be (for now, at least) in the 15% tax bracket, so any LT capital gains are at 0% federal rates (I know this may potentially change in the future).

But under current law, if I hold everything for 2 years from the start of the offer period (which I need to do anyway, 6 months + 18 months), does that mean I get LT capital gains treatment when I sell?
Not on the discount you got on the market price but on the capital gain on top of the original market price till time of sale. If disqualified the whole is ordinary income.
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Re: Another ESPP question

Post by BaylorBears »

I have a 15% ESPP purchased on the last day of the month with a max annual purchase amoun of $40,000. Shares show up in account 3-5 business days later and I can sell immediately.

Rinse, wash, repeat. Likelihood of a 15% move in that period is generally very low.
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Re: Another ESPP question

Post by tamudude »

ESPP programs at my last two jobs are what have helped me get MUCH further ahead financially than where I would have been. My company provides an ESPP program which has the following;
1. Buy every three month period.
2. The discount is 15% below the lower of the stock price on first day or last day of that window. Eg: Jan 1 stock price $45; Mar 31 stock price $24; we get 15% off the $24 :)
3. The discount (which is calculated based on actual buy price vs fair market value on date of grant) gets a favorable tax treatment if held for 18 months from time of purchase.
4. If it is a disqualifying disposition (not meeting terms of item 3), the discount is added to W2 as ordinary income.
5. If qualifying disposition (meets terms of item 3), it does not show up on your W2 and you have to report it yourself and you get a favorable tax rate.
6. Capital gains are calculated as usual (short term vs long term) once you have set cost basis based on item 4 or item 5 above.

Here is an example of how I have benefited:
Bought into company ESPP shares with discount at $39. Stock went up to $120, split, went back to $110.
I have NEVER lost money in the 12 years I have been doing ESPP at my place of work (stable energy companies).

My recommendation is :
1. Contribute 401k till company match.
2. Max out ESPP.
3. ROTH IRA.
4. Max out 401k.

regards
tamudude
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Re: Another ESPP question

Post by flybynite »

inbox788 wrote:
Bob's not my name wrote:
inbox788 wrote:You want to hold it 12 months anyway to get the lower LTCG.
This is both incorrect and inadvisable. tfb covers both points in his article: http://thefinancebuff.com/employee-stoc ... pp-is.html
I respectfully disagree with the advice given. Also, I believe it's an old article when LTCG required 18 months, not the current 12 months. The 18 month holding period should overlap with the 12 months tax treatment; does the 18 months begin with purchase? If so, they'll be eligible for long term gains the day they're available for sale. So it might not be a choice to immediate sell after 6 months in the program anyway. In a way, the holding period is actually a benefit to the employee. Either way, the two issues are independently beneficial, and both should be pursued in my opinion.

If there were no holding period, I'd STILL hold it for the LTCG. Yes, you could lose if the company stock price drops in the first 12 months after the initial 6 month period, BUT beyond that, you'd always be savings the difference between LTCG and STCG tax, which is around 20% of the gain. Plus as much as you could loose 3% or more or less, you could just as easily GAIN 3% or more or less in the same time period, so my expected return from holding it is about zero.
Almost everyone I know that has actually managed to lose money in ESPP holdings has followed this strategy. To the original poster, I would double check, in many companies 15% is not enough discount to put this much cash through that long of a holding period. If the holding period is really 3-7 days like most plans (and this is just a recommendation for long term tax benefit by the company), then I suggest max'ing it out as other posters have recommended. Don't see this as taking money away from de. Yes, you are still susceptible to a flash crash or some nonsense but then FDIC could not have enough money to pay as well! ESPP risk exposure is very minute if you are allowed to sell once shares clear the holding period and are deposited, especially since you said this was a mega-corp. This is really the only sensible strategy in my opinion as anything else puts you at to much exposure to a company that you are already heavily invested in from your well being standpoint. I'm sure some posters will tell great stories about how much taxes they avoided and how shares went up.. after all in Blackjack, over 40% of players win each hand as well! However, on the flash crash scenario, I've been in 4 companies ESPP's over 14 years some with discounts of only 10%, and selling within a few days of acquiring I've never lost money on a single trade (with discount factor'd in). YMMV of course...
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Re: Another ESPP question

Post by JamesSFO »

Bob's not my name wrote:The ESPP is free money. Don't put just 1% in. Max it at 10% or 15%, whatever your employer allows. Where else can you get a 90% annualized return?

As long as you sell immediately, the ESPP is merely a cash flow pipe, and not an investment, so it shouldn't affect your 401k contributions once you've weathered the first six-month period.
This put in every penny you can and sell right away, this is free $.
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Re: Another ESPP question

Post by inbox788 »

flybynite wrote:Almost everyone I know that has actually managed to lose money in ESPP holdings has followed this strategy. To the original poster, I would double check, in many companies 15% is not enough discount to put this much cash through that long of a holding period. If the holding period is really 3-7 days like most plans (and this is just a recommendation for long term tax benefit by the company), then I suggest max'ing it out as other posters have recommended. Don't see this as taking money away from de. Yes, you are still susceptible to a flash crash or some nonsense but then FDIC could not have enough money to pay as well! ESPP risk exposure is very minute if you are allowed to sell once shares clear the holding period and are deposited, especially since you said this was a mega-corp. This is really the only sensible strategy in my opinion as anything else puts you at to much exposure to a company that you are already heavily invested in from your well being standpoint. I'm sure some posters will tell great stories about how much taxes they avoided and how shares went up.. after all in Blackjack, over 40% of players win each hand as well! However, on the flash crash scenario, I've been in 4 companies ESPP's over 14 years some with discounts of only 10%, and selling within a few days of acquiring I've never lost money on a single trade (with discount factor'd in). YMMV of course...
I've been rethinking my position on the strategy, but still support doing ESPP AND holding long term (less so than before -- see above posting). Since OP has both requirements, he must choose all or none. I say go for it, with some risk, but very favorable expected results. If given the choice, selling ESPP at the earliest opportunity and shifting from company stock to low index fund reduces risk. Assuming people you know followed this strategy, would they have made or lost money during a comparable period? Nearly everyone lost money during the crash. So in the worst year, you might have lost 50%, but because of the 15% only lost 35%. Last year, you might have gained 30% plus the 15%. There will be more positive years and even more net positive years in the long run. And as far as the flash crash, staying with most of the companies was fine unless you were unlucky enough to have some outstanding order during the exact minutes.

For most people, 15% of your annual salary invested in your own company shouldn't cause undue stress ($15,000 for someone making $100,000). I'm atypical, but my tolerance for company stock is about 25% investable assets! Use your judgement, and pick more if your company is like P&G, less if your company is like Blackberry.
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Re: Another ESPP question

Post by roymeo »

Uh, yeah, "less if your company is like Blackberry."

Figure out before signing up whether your company will look good in 2 years when you're able to sell the stock.

Then apply that skill to other companies and buy their stock when the outlook will be good in the future. But only purchase during the favorable season.
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Re: Another ESPP question

Post by inbox788 »

roymeo wrote:Uh, yeah, "less if your company is like Blackberry."

Figure out before signing up whether your company will look good in 2 years when you're able to sell the stock.

Then apply that skill to other companies and buy their stock when the outlook will be good in the future. But only purchase during the favorable season.
Risk management, not stock picking.
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Re: Another ESPP question

Post by Billionaire »

At my company, we are allowed to contribute $21,250.00 (85% of 25,000.00) per year. I contribute $1635.00 per paycheck for 13 pay periods, so I max out by mid-year. I use savings to make up for the cash tied up in the program. The purchase is made two days after the quarter end at 85% of the price on the last day of the quarter. I sell immediately for the easy profit. As I tell my co-workers, it's like taking candy from a baby. I predict our corporate parent changes the rules to force us to hold the stock for a longer period.
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Re: Another ESPP question

Post by roymeo »

inbox788 wrote:Risk management, not stock picking.
Quite right. The stock picking has already been done for you by a quirk of employment.
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Re: Another ESPP question

Post by flybynite »

inbox788 wrote:
flybynite wrote:Almost everyone I know that has actually managed to lose money in ESPP holdings has followed this strategy. To the original poster, I would double check, in many companies 15% is not enough discount to put this much cash through that long of a holding period. If the holding period is really 3-7 days like most plans (and this is just a recommendation for long term tax benefit by the company), then I suggest max'ing it out as other posters have recommended. Don't see this as taking money away from de. Yes, you are still susceptible to a flash crash or some nonsense but then FDIC could not have enough money to pay as well! ESPP risk exposure is very minute if you are allowed to sell once shares clear the holding period and are deposited, especially since you said this was a mega-corp. This is really the only sensible strategy in my opinion as anything else puts you at to much exposure to a company that you are already heavily invested in from your well being standpoint. I'm sure some posters will tell great stories about how much taxes they avoided and how shares went up.. after all in Blackjack, over 40% of players win each hand as well! However, on the flash crash scenario, I've been in 4 companies ESPP's over 14 years some with discounts of only 10%, and selling within a few days of acquiring I've never lost money on a single trade (with discount factor'd in). YMMV of course...
I've been rethinking my position on the strategy, but still support doing ESPP AND holding long term (less so than before -- see above posting). Since OP has both requirements, he must choose all or none. I say go for it, with some risk, but very favorable expected results. If given the choice, selling ESPP at the earliest opportunity and shifting from company stock to low index fund reduces risk. Assuming people you know followed this strategy, would they have made or lost money during a comparable period? Nearly everyone lost money during the crash. So in the worst year, you might have lost 50%, but because of the 15% only lost 35%. Last year, you might have gained 30% plus the 15%. There will be more positive years and even more net positive years in the long run. And as far as the flash crash, staying with most of the companies was fine unless you were unlucky enough to have some outstanding order during the exact minutes.

For most people, 15% of your annual salary invested in your own company shouldn't cause undue stress ($15,000 for someone making $100,000). I'm atypical, but my tolerance for company stock is about 25% investable assets! Use your judgement, and pick more if your company is like P&G, less if your company is like Blackberry.
Interesting picking which company is a winner 18 months out (hope there's not another drug issue at P&G!). Apple, down $150 a share from peak, Worldcom, Lehman Brothers and Enron, some of the most respected companies in their industries gone in months from first signs of stress. Good luck with your strategy...

You asked about the folks I know who lost money, some were during the tech bubble, others were in companies that started doing more poorly while the overall market was rising. I have a particular friend who was "forced" to sell about half of his options and ESPP stock in 1999 as he needed the cash to purchase a house but otherwise wanted to hold on to his shares. Now the house is 90% of the value of the overall value retained in the investment.

When I spoke about a flash crash, I was discarding this as unlikely in the 3-7 day holding period you may incur. It's not a flash crash if your company loses 15% in 12-18 months of holding, this would be in the realm of typical stock volatility for most large companies. Putting 25% of your investments in a single company (yours or any other), this is clearly not a diversified strategy and is subject to an inordinate amount of risk.
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Re: Another ESPP question

Post by inbox788 »

flybynite wrote:Interesting picking which company is a winner 18 months out (hope there's not another drug issue at P&G!). Apple, down $150 a share from peak, Worldcom, Lehman Brothers and Enron, some of the most respected companies in their industries gone in months from first signs of stress. Good luck with your strategy...
I'm not sure we're talking about the same thing here. There are several strategies that seem to be combined and confused here, so I will go back to the original posting "I told myself I did not want participate in the ESPP for at least several years until I had more of my ducks in a row, but the 15% discount is just staring at me as an almost free money sense of things. Granted I know this is the stock market and more than 15% can vanish in a trading day ( or less), I was considering putting some money towards this for a down payment on a house in the future." Even this has multiple parts, so I will break them down.
1) ESPP at 15% discount with NO long term holding period seems to be a very beneficial program and many would agree it should be maximized, and I do too.
2) Holding your own company stock for 12-24 months seems to be discouraged, and I agree, if given a choice, you're better off holding a diversified low cost index fund like VTSMX to reduce risk. However, I don't personally have a problem with holding some company stock in my portfolio, while some consider anything more than zero to be wrong.
3) ESPP at 15% discount WITH 18 month holding period seems to be what some people are facing, and based on 1) there is a significant benefit, but 2) is a drawback. For some, the drawback eliminates the benefit completely. I disagree with that, and believe the drawback is limited, while the benefit of 1) is worth the risk. Especially if this strategy is repeated for more than 1 year. If you're at your job for 3 year or 5 years, I believe the negatives of 2) will even out, while the positives of 1) will be additive. Of course, the individual performance and luck will vary. And like I pointed out, ~$15k investment one year has to be put in context of the entire invested portfolio.
4) How far in the future is this home purchase? If it's anywhere in the near future, funds for a down payment shouldn't be in any risky equities.
You asked about the folks I know who lost money, some were during the tech bubble, others were in companies that started doing more poorly while the overall market was rising.
I asked because you said "Almost everyone I know that has actually managed to lose money in ESPP holdings has followed this strategy." Yes, in any given year, anyone can loose money in an individual stock or in the whole market. But as an investment strategy, buying whole market or individual stock across years, "almost everyone" won't be losing money. If everyone you know works for internet companies, Enron, Worldcom and Lehmans, then maybe. I don't know anyone in the 3 failed companies, and most people I know have made money in ESPP, even through the last great recession, and even without the 15%, they are still making money. If you buy through a dip, like 2008, it's like dollar cost averaging. If you buy in first year, and roll your purchases year to year by selling the earlier purchases (past the 12/18 month holding period), then you make or lose money depending on your purchase price in year 1 vs. price today or when you eventually finish the program and sell out at after the required holding period. Some companies will have lost money in 3-5 years, but historically, on average, most companies have grown.
I have a particular friend who was "forced" to sell about half of his options and ESPP stock in 1999 as he needed the cash to purchase a house but otherwise wanted to hold on to his shares. Now the house is 90% of the value of the overall value retained in the investment.
I'm confused by this. Why was he "forced"? By his IPS? Spouse? Did he escape the dotcom crash, or miss out on the last 50% gain in the 2000 bubble? In any case, investing, especially risky investing doesn't mix with down payment on the house. One has to make a decision on whether the funds are meant for home purchase and allocate it wisely, or for investment which involves a different allocation strategy. Using your down payment for a home you want to buy this year for any investing is probably foolish. Now for future purchase that 5-10 years or longer, it's a different question. In any case, your friend wouldn't have had options and ESPP in 1999 if he didn't acquire them before 1999 and had disposed of them well before then. For those employees who weren't buying homes, should they have sold or held in 1999? 1998? 1997? 2020?
Putting 25% of your investments in a single company (yours or any other), this is clearly not a diversified strategy and is subject to an inordinate amount of risk.
Absolutely! I did say atypical. I'm not advocating this strategy (different from the ESPP purchase strategy) for everyone, but some people can handle the higher level of risk. I began with 5% as my speculative allocation. Over time, it grew to 10% as my risk tolerance grew. If I lost it all, I could manage with the 90% remaining. When the speculative allocation grew disproportionately and I had more funds to invest, I could have re-balanced, but decided keep separate investment buckets and let them grow independently. I guess I could have increased my total equity allocation. Diversification reduced risk, but it also limits out performance. I don't know how to determine whether the higher performance on the speculative bucket so far is because of luck or simply higher risk/reward.
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Re: Another ESPP question

Post by roymeo »

I think the point where you start talking about how small a part of a portfolio you're 'investing' your 'fun money' is where you start to lose me.

Risking 5-10% of one's portfolio for a 'bonus' of 15% of the up-to-25% of your annual salary may not balance to a rational decision.

Apple's a great example--a couple years ago there were many posts here with people riding the wave of enthusiasm of the stock price, and the company hasn't obviously stumbled in a Kodak or even Enron sort of way, yet we're now entering a period where an employee holding for 2 years after purchase could be under water even with that guaranteed 15% discount at time of purchase. That's a crappy place to be in, at least to me as a person who doesn't own or want to own individual stocks.

If the 2-year gamble is worth it, you'll still need to convince me that the 15% discount + holding period + stock selection being chosen by a quirk of employment is better than investing with 0% discount + no holding period + stock of my own selection (or index fund) based on fundamentals. If my employer + discount is good, I wonder whether maybe you, too wouldn't be better off investing in my employer without a discount rather than yours with discount.

If you're main defense is "well, it's a small part and only fun money" I think you've fallen in love with a 'bargain' or company.

I participated fully in my last ESPP program, but with the caveat that I sold ASAP (a couple of days). I'd graciously accept many fine gifts from my employer, but just because they give me a company logo polo-shirt, box of mint chocolates, motorcycle, or baby hippopotamus doesn't mean I'd change my lifestyle (I don't do logos and believe polo shirts belong on food service workers, hating mint+chocolate, non-motorcycle driving, impractical to keep a hippo in San Francisco as much fun as it would be) to adapt to it. Nor do I change my investing philosophy to take on risk to try to eek out a tax benefit (no holding period required) or any benefit (2 year holding) and hold an individual stock when that's not the sort of investor I am.

YMMV and/or your investment philosophy may be more malleable, of course.
The sewer system is a form of welfare state. | -- "Libra", Don DeLillo
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