DCA vs lumpsum for company RSUs

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JD13
Posts: 30
Joined: Thu Nov 01, 2018 8:12 pm

DCA vs lumpsum for company RSUs

Post by JD13 » Tue Aug 13, 2019 11:59 pm

I work at Microsoft and will receive a large grant of RSUs (70k) soon. Previously I would move that directly to VTI in my Fidelity account, but this time I want to double check and want opinion from Bogleheads if that is the right thing to do or I should Dollar cost average this amount across 6 months say. Any thoughts on this?

HawkeyePierce
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Location: Colorado

Re: DCA vs lumpsum for company RSUs

Post by HawkeyePierce » Wed Aug 14, 2019 12:29 am

Sell immediately. Your income is already tied to your employer, no need to also hook your net worth up to their fortunes.

Bungo
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Re: DCA vs lumpsum for company RSUs

Post by Bungo » Wed Aug 14, 2019 1:53 am

I always sell employer stock as soon as it vests. Otherwise, it's too many eggs in one basket and avoidable single-company risk. Even if I were inclined to buy stock in individual companies, I would ask myself, if I received the same sum in cash, would I use it to buy my employer's stock? If not, then it follows that I should sell the stock.

As for dollar cost averaging, you're already doing that assuming that your RSUs vest periodically (every six months in my case).

Admittedly it can be painful sticking to this policy when your employer's stock is down. 2009-2010 was not much fun, when my company's stock was down 75%. But I stuck to it and no regrets. I had friends at other companies who weren't so lucky and were left holding worthless shares when their employers' stock went to zero.

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mhc
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Location: NoCo

Re: DCA vs lumpsum for company RSUs

Post by mhc » Wed Aug 14, 2019 9:04 am

Sell immediately. Too much risk holding a single stock. You will have to pay normal income tax on the shares as soon as they vest. Diversify your risk. VTI sounds good.

Topic Author
JD13
Posts: 30
Joined: Thu Nov 01, 2018 8:12 pm

Re: DCA vs lumpsum for company RSUs

Post by JD13 » Wed Aug 14, 2019 9:29 am

I will sell immediately. I'm more interested if I should DCA the amount, given the market is very volatile right now and the amount is large. What do you guys think?

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TomatoTomahto
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Re: DCA vs lumpsum for company RSUs

Post by TomatoTomahto » Wed Aug 14, 2019 9:42 am

JD13 wrote:
Wed Aug 14, 2019 9:29 am
I will sell immediately. I'm more interested if I should DCA the amount, given the market is very volatile right now and the amount is large. What do you guys think?
I think you confused the responders by highlighting that there are RSUs involved, rather than just “lumpy” salary income.

It’s really the same as all of the DCA vs lump sum threads on BH. You will probably feel better if you DCA it over the same timeframe as when the next RSU tranche vests. Treat it like expanded salary.
Okay, I get it; I won't be political or controversial. The Earth is flat.

dbr
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Re: DCA vs lumpsum for company RSUs

Post by dbr » Wed Aug 14, 2019 9:56 am

TomatoTomahto wrote:
Wed Aug 14, 2019 9:42 am
JD13 wrote:
Wed Aug 14, 2019 9:29 am
I will sell immediately. I'm more interested if I should DCA the amount, given the market is very volatile right now and the amount is large. What do you guys think?
I think you confused the responders by highlighting that there are RSUs involved, rather than just “lumpy” salary income.

It’s really the same as all of the DCA vs lump sum threads on BH. You will probably feel better if you DCA it over the same timeframe as when the next RSU tranche vests. Treat it like expanded salary.
Yes, if a person wants to "feel better" then DCA might well be what they "should" do. This seems to be the essence of this discussion every time it comes up. I don't have a problem with that as people are responsible for their own behavior.

BrainDrain
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Re: DCA vs lumpsum for company RSUs

Post by BrainDrain » Wed Aug 14, 2019 11:11 pm

Sell it right away. Microsoft just gave you an RSU bonus that you must pay tax on just like any other form of compensation. Think about this, if they gave a $50k cash bonus would you turn around and buy company stock? That’s exactly what you’d be doing by holding the RSUs after they vest. The fact they give the bonus to you in company stock means nothing.

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