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Re: ESPP - What would you do?
Old 03-21-2007, 01:23 PM   #21
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Re: ESPP - What would you do?

Quote:
Originally Posted by youbet
. Your only risk is price movement between the time your discounted purchase price is locked in and the day you are free to sell the shares. That was typically three business days where I worked.


I'm a real doubter when it comes to anything that sounds like a free lunch. But these ESPP plans, like I had and like the one OP described, really are too good to pass up. High gains and low risk.

We were only allowed to participate with 10% of our salary. I would have particiapted with 100% if they would have allowed it, using savings to live off of while the six month period rolled by.
Absolutely, YES, DO IT!!!!

I had the same plan at the mega-corp I retired from. No limit on selling at once.

I used to scream at my co-workers to do it. I couldn't believe that people were willing to turn down 'free money'. Like youbet, I am very skeptical of a 'free lunch' offer - but this is really a company benefit that is offered. Take advantage of it! Would you turn down the health care, or vacation, or a raise?

Sell immediately. If you hold, you wipe out the 'almost guaranteed' part. This is the lowest risk, legal, almost guaranteed chance of getting a minimum of 32% annual return you will ever see. You might even call it 64% return, since you put your money in over time, not all upfront (like a CD), so your average invested dollar is actually half. And, because of that 'lower of the two dates', you *will* do better on average.

Since we were limited to 10% of pay, I used to try to get people to let me loan them the money and split the profits. No takers.

And, if you want it guaranteed, you can, it will only cost you a bit in option premiums, or to tie up your money for a few days while you short an equal amount of stock in another account. I just let it ride for the three days, I figured the chance of it going up or down a bit was 50/50. Never amounted to much.

Oh, yes, in case you didn't get the idea: DO IT! Borrow the money if you need to - you won't be paying 64%, or even 32%.

-ERD50
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Re: ESPP - What would you do?
Old 03-21-2007, 02:22 PM   #22
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Re: ESPP - What would you do?

Quote:
Originally Posted by ERD50
Absolutely, YES, DO IT!!!!


I used to scream at my co-workers to do it. I couldn't believe that people were willing to turn down 'free money'.
They're probably the same ones not taking advantage of the full 401(k) employer match. For us money-savvy individuals it is truly inconceivable, isn't it??

- John
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Re: ESPP - What would you do?
Old 03-21-2007, 03:36 PM   #23
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Re: ESPP - What would you do?

Quote:
Originally Posted by youbet
If you plan to sell the shares immediately, there is no risk and that is the best way to do it. Also, the minimum annual yield is 30% (15% twice a year). And you get the minimum 30% annual on the total amount they deduct from your check during the six month period but you get to have the money taken out of your check over the six months! So sweet...... !!

There is no risk....no need to hedge. Just sell immediately.
The minimum yield is 30% annualized. (15% twice a year)
You get the yield on the total amount contributed for the period, but get to contribute it slowly over the period.
If the stock is volatile, some periods you will get well over the minimum!

So sweet........

BTW, did I mention I liked the plan and miss it now that I'm RE?
I think the yield is 15% total. Remember you are paying in 2 periods, so yes you are getting 15% twice, but you had to pony up another Chunk of cash for the second 15% - So it's 15% yield on the total amount.
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Re: ESPP - What would you do?
Old 03-21-2007, 04:15 PM   #24
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Re: ESPP - What would you do?

I'd crank that mother up to the max that was allowed and flip the stock immediately every 6 months.
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Re: ESPP - What would you do?
Old 03-21-2007, 04:54 PM   #25
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Re: ESPP - What would you do?

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I think the yield is 15% total. Remember you are paying in 2 periods, so yes you are getting 15% twice, but you had to pony up another Chunk of cash for the second 15% - So it's 15% yield on the total amount.
No, it is even better than that.

First, a 15% discount means you buy at .85 sell at 1.00. 1.00/.85= 17.6% gain.

That is an absolute gain, not an annualized gain. So, you do it the first 6 months and get 17.6% on your money, and then again the second 6 months, and you made 35.3%. Technically, you could also say that yo can take your profits from the first 6 month period and make another bit at money market rates (if you maxed out, you can't plow any more into it).

Think of it as a 6 month CD that sold at a 15% discount. 17.6% gain. Do it twice sequentially in a year and you make 35.3%.

Second, about half the time, you can expect that a stock rise means you make even more (you get the lower of the start/end dates).

Third, you can double both of those numbers. Because you deposit the monthly evenly with each paycheck over the 6 months. So, on average, you really only have half the money in the account, zero at the start, the full amount only for the last pay period. So, roughly 70% annualized - more if the stock moves up.

None of that means you get any more money, but the numbers are impressive. If you can put 10K into it, you make $3,520 profit, minimum.

It's a gift - take it!

-ERD50

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Re: ESPP - What would you do?
Old 03-21-2007, 05:01 PM   #26
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Re: ESPP - What would you do?

Yes, you are correct. Since I'm not selling. We are letting it ride, so a stock that is going sideways is only up 15% for the year for us.

But, I stand corrected for if you sold immediately, you could use that money to make another 15%
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Re: ESPP - What would you do?
Old 03-21-2007, 05:10 PM   #27
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Re: ESPP - What would you do?

yes... us poor people who only get 5% and can't sell..... or we get booted out of the plan... horrible...
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