SGH Wealth Management: What I'm Reading

How much Company Stock is too much Company Stock?

SGH Wealth Management

Being offered Stock in the company you work for is a great career milestone but how does it fit into the big picture. Sometimes being too close to a situation can cloud the risks of stock investing, just ask any former ENRON employee. It is common for employees to accumulate a highly concentrated position in their employer’s stock usually caused by the psychological bias of “Fear Of Missing Out” (FOMO) saying to themselves:

“Once it hits the price it was at last year, I’ll sell”

“I can’t sell now, it just went up 10%”

This circular logic keeps investors in a holding pattern, looking for this just out of reach “better time to sell”. Allowing this cycle to continue leaves the future retiree vulnerable to losing their working income and their investment value in one stroke. A situation that Netflix’s Tiger King would describe by saying, “I am never going to financially recover from this”.

Fully understanding the structure and operation of your ESOPs and RSUs is the only way to maximize this great benefit in your overall situation. Get the scenario analysis you need to understand the effect of your employer stock benefit and develop a pre-planned strategy of divesture to control the risks toward your path to retirement.