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Excess 401k, or ESPP, or IRA ??
Old 03-28-2011, 09:33 AM   #1
Confused about dryer sheets
Join Date: Mar 2011
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Excess 401k, or ESPP, or IRA ??

I am sure this question has been asked a million times, but I have yet to find answers for my personal situation.

Here it is..

I contribute 5% of my pay to my 401k to max my employers match.

I have another small chunk that I would like to invest somewhere. My employer also has an Employee Stock Purchase Plan. It is 15% discount off lower of two prices (period start day & period end day). Two contribution periods per year. Pretty standard. However, there is a 12 month mandatory holding period on the shares.

I am willing to participate in the ESPP, but I am also tempted to put that extra chunk as excess contributions to my 401k and be more aggressive with that portion, such as putting it into Small Equities. I am 27 years old, so I am willing to take some risks with the excess at this point. I also, of course, have the option to stick that extra into an IRA or invest in the market on my own (mutual funds, etc.).

I am open to either investing for the long run, or seeing quicker tangible returns.

Any advice is appreciated. Thank you in advance.

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Old 05-13-2011, 09:12 PM   #2
Full time employment: Posting here.
Join Date: Jun 2007
Posts: 567
I'd say it depends how stable your employer is and how stable their stock is. If it's stable, buying it on sale and selling it after the holding period is a pretty decent deal. Minimum 15% break and hold it until it's a long term gain.

Flip side is that you're overly exposing yourself to a specific sector and also concentrating too much (your salary + your ESPP) on a single stock (company goes belly up and you're out a job and out the stock)
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