5% ESPP

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BUBear29
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5% ESPP

Post by BUBear29 » Wed Oct 17, 2018 5:11 am

Yes yes another ESPP question. Ive been racking my brain over whether to participate.

- Purchased every 3 months based on 5% off average price of the period.
- I am subject to blackout period every quarter once shares are bought and cannot transact in the market for about 14 days from quarter end

I want to participate bc my employers stock has gone from $50 to about $110 in the last few years (I am kicking myself for not owning stock in that run up). Employer is mega financial institution with an excellent reputation.

Thoughts on participating?
There is no dignity quite so impressive, and no one independence quite so important, as living within your means.

Jack FFR1846
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Re: 5% ESPP

Post by Jack FFR1846 » Wed Oct 17, 2018 6:16 am

Personally, I'd skip it. I'm at a company whose stock went from the 50's range when I joined 2 1/2 years ago up to 104. Then the executives performed some extreme stupidity antics and we're now at 60. I get ESPP at 15% minimum off lowest price of first or last day of the buy period and can sell-on-vest. Blackout periods or holding periods are too risky for me.
Bogle: Smart Beta is stupid

BUBear29
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Re: 5% ESPP

Post by BUBear29 » Wed Oct 17, 2018 11:28 am

Thanks for the reply. Yes, the blackout period is what concerns me. During that 14 days is when we announce earnings. When the economy is good, the company will do well (as reflected in our stock runup) which is why I am still considering doing it, but i could also just take that money and put it in a mutual fund instead.
There is no dignity quite so impressive, and no one independence quite so important, as living within your means.

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car733
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Re: 5% ESPP

Post by car733 » Wed Oct 17, 2018 11:38 am

Do you get RSUs or stock options?
I like having some stocks in the place I work at. If you don't have RSU/stock options, I would buy at least once.

badger42
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Re: 5% ESPP

Post by badger42 » Wed Oct 17, 2018 11:40 am

5% off average (not lowest) is pretty bad, that could easily be higher than the current market price at the time of purchase. Between that and the 14-day minimum hold, I would probably skip and just invest normally.

If you had a better ESPP (10% or 15% off, or even 5% off lowest) would probably suggest maxing it out and selling as soon as allowed (take the quick gains, minimize company stock risk)

BUBear29
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Re: 5% ESPP

Post by BUBear29 » Wed Oct 17, 2018 11:40 am

car733 wrote:
Wed Oct 17, 2018 11:38 am
Do you get RSUs or stock options?
I like having some stocks in the place I work at. If you don't have RSU/stock options, I would buy at least once.
At my current level, no. I will in a few years though.

When you say buy at least once, I assume you are referring to a buy and hold scenario? If so, I assume this is a relatively small amount.
There is no dignity quite so impressive, and no one independence quite so important, as living within your means.

BUBear29
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Re: 5% ESPP

Post by BUBear29 » Wed Oct 17, 2018 11:45 am

badger42 wrote:
Wed Oct 17, 2018 11:40 am
5% off average (not lowest) is pretty bad, that could easily be higher than the current market price at the time of purchase. Between that and the 14-day minimum hold, I would probably skip and just invest normally.

If you had a better ESPP (10% or 15% off, or even 5% off lowest) would probably suggest maxing it out and selling as soon as allowed (take the quick gains, minimize company stock risk)
Thanks. What if 5% off last day of period (purchase date) but still a 14 day hold? Just curious.

Seems the 14 day hold is the killer here to me.
Last edited by BUBear29 on Wed Oct 17, 2018 12:07 pm, edited 1 time in total.
There is no dignity quite so impressive, and no one independence quite so important, as living within your means.

Thegame14
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Re: 5% ESPP

Post by Thegame14 » Wed Oct 17, 2018 11:45 am

5% of average price, doesn't seem like much of a discount. Like other person said if it was 15% off lowest price during a period, that is a discount.

Darth Xanadu
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Re: 5% ESPP

Post by Darth Xanadu » Wed Oct 17, 2018 12:31 pm

badger42 wrote:
Wed Oct 17, 2018 11:40 am
5% off average (not lowest) is pretty bad, that could easily be higher than the current market price at the time of purchase. Between that and the 14-day minimum hold, I would probably skip and just invest normally.

If you had a better ESPP (10% or 15% off, or even 5% off lowest) would probably suggest maxing it out and selling as soon as allowed (take the quick gains, minimize company stock risk)
I could not agree more with this post! 8-)
"A courageous teacher, failure is."

badger42
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Re: 5% ESPP

Post by badger42 » Wed Oct 17, 2018 2:27 pm

BUBear29 wrote:
Wed Oct 17, 2018 11:45 am
badger42 wrote:
Wed Oct 17, 2018 11:40 am
5% off average (not lowest) is pretty bad, that could easily be higher than the current market price at the time of purchase. Between that and the 14-day minimum hold, I would probably skip and just invest normally.

If you had a better ESPP (10% or 15% off, or even 5% off lowest) would probably suggest maxing it out and selling as soon as allowed (take the quick gains, minimize company stock risk)
Thanks. What if 5% off last day of period (purchase date) but still a 14 day hold? Just curious.

Seems the 14 day hold is the killer here to me.
For 5% off last day, I would probably risk the 14-day hold, but sell exactly after 14 days. This assumes reasonable confidence in my company and industry of course. If I thought my employer was headed for trouble, I would stay away.

inbox788
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Re: 5% ESPP

Post by inbox788 » Wed Oct 17, 2018 2:52 pm

I'd do it if it wasn't too much concentration. How much is the max you can put in (and pull out as you've met the holding requirement) and what percentage of your investable assets would it amount to? I wouldn't be scared off by up to 10% or so.
Jack FFR1846 wrote:
Wed Oct 17, 2018 6:16 am
Personally, I'd skip it. I'm at a company whose stock went from the 50's range when I joined 2 1/2 years ago up to 104. Then the executives performed some extreme stupidity antics and we're now at 60. I get ESPP at 15% minimum off lowest price of first or last day of the buy period and can sell-on-vest. Blackout periods or holding periods are too risky for me.
Yours sounds a lot better than OP. I think you're passing on a good, albeit risky opportunity.
car733 wrote:
Wed Oct 17, 2018 11:38 am
Do you get RSUs or stock options?
I like having some stocks in the place I work at. If you don't have RSU/stock options, I would buy at least once.
Other than too much concentration in a single stock, which is a different question, just participating in another program wouldn't preclude me from partaking in this one.

Luke Duke
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Re: 5% ESPP

Post by Luke Duke » Wed Oct 17, 2018 2:52 pm

I don't think that its worth it for a 5% discount.

BUBear29
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Re: 5% ESPP

Post by BUBear29 » Wed Oct 17, 2018 3:17 pm

Ok I just took another look. I have a standard 14 day holding period every quarter. But apparently its a 30 day holding period for my ESPP (which is news to me).

My wife and I have around $200k in retirement assets and $100k in taxable. We are 28-29. We could probably risk the exposure to the espp but why do that when i can add to my 3 fund taxable portfolio?
There is no dignity quite so impressive, and no one independence quite so important, as living within your means.

madbrain
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Re: 5% ESPP

Post by madbrain » Wed Oct 17, 2018 3:25 pm

With 5% off average, you could withdraw from the ESPP shortly before the end of the period if the price declined, and request a return of your contributions. Then enroll again for the next period.

I had an ESPP at my previous company with 5% off the last day of the period. No holding period, but it usually took at least a week for the shares to show up. Sometimes 2. The delay often ate the entire discount.

libralibra
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Re: 5% ESPP

Post by libralibra » Wed Oct 17, 2018 4:47 pm

This "5% off average price of the period" makes no sense. Maybe you mean avg price on purchase date? If you are talking about JPM, check out this thread viewtopic.php?t=200885

BUBear29
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Re: 5% ESPP

Post by BUBear29 » Wed Oct 17, 2018 5:15 pm

You are correct. Its purchase date, but often the 30 day window wipes out the benefit.
There is no dignity quite so impressive, and no one independence quite so important, as living within your means.

inbox788
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Re: 5% ESPP

Post by inbox788 » Fri Oct 19, 2018 12:22 am

madbrain wrote:
Wed Oct 17, 2018 3:25 pm
I had an ESPP at my previous company with 5% off the last day of the period. No holding period, but it usually took at least a week for the shares to show up. Sometimes 2. The delay often ate the entire discount.
BUBear29 wrote:
Wed Oct 17, 2018 5:15 pm
You are correct. Its purchase date, but often the 30 day window wipes out the benefit.
You're both pessimists. Doesn't the delay sometimes rise as well? On average, it should even out, and even rise a bit because of the overall rising market. Has the individual stock you've been tracking been following a downward trend? In an overall rising trend, it's awfully strange for the delay to cause specific rises and dips around the ESPP dates, but if that's the pattern you're finding, then hold it a bit longer.

The way I see it is you're gambling with match play at 5%, so win or lose, you'll wind up around average plus the 5% (and potentially much higher level of return depending on frequency and actual cash outlay; ROIC? CROCI? ). The more rounds you play, the closer to average I'd expect the base result to be.

https://www.investopedia.com/terms/c/croci.asp
https://www.investopedia.com/terms/r/re ... apital.asp

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