Company stock -- what would you do?

[v]

My company's stock is doing really well.  In the 6 months since I started it is up 24%, and this is part of a steady growth trend over the past few years.  It is well regarded by analysts and there is good diversity in the company's investments, so I believe in it as an investment.  

But -- I work there so there's the question of how many eggs I want in that basket.  Also, it is by far at an all-time high.

The way our stock purchase plan works, we can buy through payroll deductions (I think we can also do lump sums over a certain amount, and there is a loan program that I do not understand at all).  Once a year, we get a bonus of 10% of our shares (so if I owned 3 shares, they'd give me an extra 0.3 shares so I'd have 3.3 shares).  There's no fee to buy them.

Other relevant detail -- after I've been there for a year, (in January), I'll be eligible for company 401(k) matching/contributions that will be 9% of my total comp, all in company stock (but that can be immediately sold off in favor of other plan options).  That will vest over 4 years though.

So with all that said, how much would you want to contribute per paycheck to the stock purchase plan?  Right now I am contributing $50 per paycheck (I get paid 26 times a year), but I feel like I'm missing out with all this growth.  But again, eggs in one basket.

Thanks!

 

[doobeedoo]

Hmmm. In general, I do believe in not having too many eggs in one basket, 'specially if you work where the eggs are produced. That said, an ESPP provides an opportunity to buy a stock at a discount (5%?), and, generally speaking, that is a good deal. I'd probably up my contribution by another $50 per paycheck and see what happens. I would not go all in.

[cheezer]

To me it's not the dollar amount spent per month on the stock plan but what percentage of your total spend per month in the market. I probably wouldn't do higher than 15%. So if you're putting $100 into your company I'd want another $550 going into the general market.

[crashgizmo]

Jul 5, 2015 20:11:34 GMT -5 cheezer said:

To me it's not the dollar amount spent per month on the stock plan but what percentage of your total spend per month in the market. I probably wouldn't do higher than 15%. So if you're putting $100 into your company I'd want another $550 going into the general market.

This what I was going to stay. DH has a similar deal, and we always make sure his company stock makes up less than 20% of our overall contributions. When I first met DH, it was much higher and during a consultation with a Financial Advisor we received the advice of limiting it. 

[sfy]

Jul 5, 2015 18:47:43 GMT -5 doobeedoo said:

In general, I do believe in not having too many eggs in one basket, 'specially if you work where the eggs are produced. 

I agree with this sentiment, but if you plan to sell the stock basically upon receipt, then I don't quite see it this way. The cap is $25k/year and I think most places have twice a year sales, which means you're unlikely to ever have more than $12,500 in the stock at a time anyway, again assuming immediate sale.  I don't have the option, but I set up H's for him. He contributes a percentage and we sold it as soon as it was purchased. Because he also receives equity grants which we don't plan to sell, we will always sell the ESPP stock right away.  His company stock is also at an all time high and I would have really regretted if we'd been conservative this last time around.  I think 5-10% is a good idea.

[mich1]

SO wants no more than 10% his investments in company stock. He sold off about 50% of it last year as he was uncomfortable with it being 25% of his investments.

He just got another bolus in stock as a bonus last week, which bumps him up a little higher than he wants to be. I think it is pushed him to around 15% and he is just going to hold onto it a bit. It historically does very well, but remembers Enron.

[v]

Jul 5, 2015 20:11:34 GMT -5 cheezer said:

To me it's not the dollar amount spent per month on the stock plan but what percentage of your total spend per month in the market. I probably wouldn't do higher than 15%. So if you're putting $100 into your company I'd want another $550 going into the general market.

I understand the point here (and to the other points about not wanting to leave more than 10% of our portfolio in company stock), but does the answer change if I'm new to the company and just starting to put money into the company stock?   We already have a lot of money in the market, and I have something like $600 in company stock so far.  So I'm in no danger of company stock becoming more than 10% any time soon.  Our investments into non-retirement savings vary by month, but we max out our 401(k)s so even if we didn't put another penny in the market there's $3000 a month going into things that are not my company's stock.  (But to retirement accounts, for what it's worth.)

[Poppy]

The 10% bonus - is that on ask shares in this account or at purchase time? In other words, does it compound? If so, that's pretty cool.

For a regular ESPP, a year is kind of a long subscription period. Is there a price lock? A holding period requirement?

[v]

Jul 6, 2015 6:05:05 GMT -5 Poppy said:

The 10% bonus - is that on ask shares in this account or at purchase time? In other words, does it compound? If so, that's pretty cool.

For a regular ESPP, a year is kind of a long subscription period. Is there a price lock? A holding period requirement?

The policy says "Participants will receive a stock bonus of ten percent of the net increase in shares of common stock purchased under the plan during a given year. Stock bonus awards will be based in the net number of shares of common stock purchased from January 1 through December 31 of a given year...." Splits and such don't count.

We can sell at any time but that would affect the net increase. That said, this is a stock that I would want to hold onto for a while.

[mokes]

Provided I'm buying at a discount, I would buy the max allowed and sell 90% whenever the required holding period is up or after the bonus is awarded for that year.

[v]

Jul 6, 2015 7:59:16 GMT -5 mokes said:

Provided I'm buying at a discount, I would buy the max allowed and sell 90% whenever the required holding period is up or after the bonus is awarded for that year.

There's no max (well, on the payroll deduction I guess the max is my entire paycheck) and beyond that there are lump sum contributions that can be made (and if we want to buy $10k or more at a time, there's a loan option, but then you pay interest and only get a 5% bonus).

But we need to pay our bills and all, so... 100% is definitely not the answer.

[aurora]

Jul 6, 2015 5:52:39 GMT -5 v said:

Jul 5, 2015 20:11:34 GMT -5 cheezer said:

To me it's not the dollar amount spent per month on the stock plan but what percentage of your total spend per month in the market. I probably wouldn't do higher than 15%. So if you're putting $100 into your company I'd want another $550 going into the general market.

I understand the point here (and to the other points about not wanting to leave more than 10% of our portfolio in company stock), but does the answer change if I'm new to the company and just starting to put money into the company stock?   We already have a lot of money in the market, and I have something like $600 in company stock so far.  So I'm in no danger of company stock becoming more than 10% any time soon.  Our investments into non-retirement savings vary by month, but we max out our 401(k)s so even if we didn't put another penny in the market there's $3000 a month going into things that are not my company's stock.  (But to retirement accounts, for what it's worth.)

I would be comfortable putting more into a single stock if it is a low percentage of my total holdings, yes. I mean, that's what I do any time I buy a new stock: I put 100% of my investments that week or month or whatever time period into what I'm buying. So if you have $100k in the market and want to put $500/month into company stock you'll still be below 10% at the end of a year (unless company stock does really well!)

I wouldn't want to completely neglect purchasing other investments for the year, though, but I'm not surs what the right ratio is.

[Pom]

Knowing you most likely have a very diversified portfolio already, I'd be buying more now. Since it is doing well, I'd be good with a higher percentage of your salary investment, 25%+ assuming that your joint and H's investments are varied. I am certain your company stock will be a pretty small piece of the pie as you review your overall current picture. Considering it is a good performer, I'd take advantage of the discount to buy and bonus in for now, until you grow it to a place you want and feel comfortable at and then pull back a bit.

[mokes]

Jul 6, 2015 8:25:58 GMT -5 v said:

Jul 6, 2015 7:59:16 GMT -5 mokes said:

Provided I'm buying at a discount, I would buy the max allowed and sell 90% whenever the required holding period is up or after the bonus is awarded for that year.

There's no max (well, on the payroll deduction I guess the max is my entire paycheck) and beyond that there are lump sum contributions that can be made (and if we want to buy $10k or more at a time, there's a loan option, but then you pay interest and only get a 5% bonus).

But we need to pay our bills and all, so... 100% is definitely not the answer.

Sorry, I guess I was assuming it was a qualified ESPP (in which case the max would be $25k/year or possibly less). Do you get a discount on the price? Do you have to hold for a certain amount of time?

[v]

Jul 6, 2015 12:29:52 GMT -5 mokes said:

Jul 6, 2015 8:25:58 GMT -5 v said:

There's no max (well, on the payroll deduction I guess the max is my entire paycheck) and beyond that there are lump sum contributions that can be made (and if we want to buy $10k or more at a time, there's a loan option, but then you pay interest and only get a 5% bonus).

But we need to pay our bills and all, so... 100% is definitely not the answer.

Sorry, I guess I was assuming it was a qualified ESPP (in which case the max would be $25k/year or possibly less). Do you get a discount on the price? Do you have to hold for a certain amount of time?

Ah, no idea whether it is qualified but $25k isn't happening either way   No discount on price -- the benefit is the bonus mentioned above.  And I have to own it on December 31 for it to count towards the bonus, but otherwise there are no sale restrictions.

[BirdGirl]

$1300/year sounds like a long way from all your eggs in one basket. I'd double that. Likely triple to get the bonus. I think anything under $5000/year would be a "safe" investment.