When should I sell my shares from my ESPP?

[F.I.R.E User]

I have had an employer ESPP since 2007 and have always sold on profit. Usually once every year. Plan requires that I hold shares for 1 year before I can sell. That being said, how long should I wait to sell some shares on a profit?

Company stock is about 1% on my total portfolio and I also get 15% discount per share.

 

[PaunchyPirate]

I have had an employer ESPP since 2007 and have always sold on profit. Usually once every year. Plan requires that I hold shares for 1 year before I can sell. That being said, how long should I wait to sell some shares on a profit?

Company stock is about 1% on my total portfolio and I also get 15% discount per share.

I always sold one day after my shares were eligible to be sold. I never was in a situation where I wasn’t at a profit.

 

[F.I.R.E User]

I always sold one day after my shares were eligible to be sold. I never was in a situation where I wasn’t at a profit.

Oh ok. Did you reinvest the gains elsewhere?

 

[PaunchyPirate]

Oh ok. Did you reinvest the gains elsewhere?

Most of the time. Or I spent it on something. The reason I sold quickly was to minimize my stock holdings for the company I worked for. Diversification.

 

[F.I.R.E User]

Most of the time. Or I spent it on something. The reason I sold quickly was to minimize my stock holdings for the company I worked for. Diversification.

Oh ok.

 

[F.I.R.E User]

So sell it as soon as I am eligible and use that money to perhaps invest in my taxable VTSAX?

 

[LarryMelman]

I have had an employer ESPP since 2007 and have always sold on profit. Usually once every year. Plan requires that I hold shares for 1 year before I can sell. That being said, how long should I wait to sell some shares on a profit?

Company stock is about 1% on my total portfolio and I also get 15% discount per share.

Why do you think there is a correct answer to this question? What do you think?

 

[F.I.R.E User]

Why do you think there is a correct answer to this question? What do you think?

I guess it varies.

 

[Philliefan33]

If you wouldn’t hold shares in your company that were not purchased through the ESPP, then you shouldn’t hold ESPP shares.

I usually sold mine as soon as I was allowed.

 

[F.I.R.E User]

If you wouldn’t hold shares in your company that were not purchased through the ESPP, then you shouldn’t hold ESPP shares.

I usually sold mine as soon as I was allowed.

They were purchased through my company’s ESPP. It’s at Fidelity.

 

[fh2000]

My method is different so do not follow if you are not able to handle the risk.

I held on to 3 ESPP stocks from 3 companies that I worked for. One was a complete loss. The other 2 with substantial gain (200% - 300%) after holding on to the shares for more than 15 years. I now treat them as my long term holdings.

So, this really depends on your company outlook, and how your investment style guides you. If your company is one of the FANG companies, I might hold on to the shares. Otherwise, sell as soon as you are eligible, and move the funds to S&P 500 index.

 

[F.I.R.E User]

My method is different so do not follow if you are not able to handle the risk.

I held on to 3 ESPP stocks from 3 companies that I worked for. One was a complete loss. The other 2 with substantial gain (200% - 300%) after holding on to the shares for more than 15 years. I now treat them as my long term holdings.

So, this really depends on your company outlook, and how your investment style guides you. If your company is one of the FANG companies, I might hold on to the shares. Otherwise, sell as soon as you are eligible, and move the funds to S&P 500 index.

Not a FANG company but a very big well known company.

 

[PaunchyPirate]

They were purchased through my company’s ESPP. It’s at Fidelity.

His point was “is this a stock that you would buy if you were NOT employed there and NOT a member of the ESPP PLAN?”

In other words, if you would not normally buy this stock outside of your ESPP, then don’t hold on to it any longer than necessary to get your profit.

If you have researched and believe the stock is a good long-term holding, then ther is nothing wrong with holding it to hopefully make even more money. Just be cautious to not let it rise to become a large percentage of your investments. What is a “large percentage”? Opinions vary. But many say that up to 5% of holdings in one individual stock might be safe IF your investments are otherwise widely diversified.

Others feel that having a large % of your investments in the company that also supplies your salary is not healthy. If the company begins to fail, you could be laid off at the same time a large % of your investments fall in value. The more diversified you are with your investments, the less impact on your being laid off. But, again, opinions vary on the value of “large percentage.”

There is no right answer for everyone. Just consider all of this in making your own personal decision.

 

[tulak]

I sell them right away.

 

[F.I.R.E User]

His point was “is this a stock that you would buy if you were NOT employed there and NOT a member of the ESPP PLAN?”

In other words, if you would not normally buy this stock outside of your ESPP, then don’t hold on to it any longer than necessary to get your profit.

If you have researched and believe the stock is a good long-term holding, then ther is nothing wrong with holding it to hopefully make even more money. Just be cautious to not let it rise to become a large percentage of your investments. What is a “large percentage”? Opinions vary. But many say that up to 5% of holdings in one individual stock might be safe IF your investments are otherwise widely diversified.

Others feel that having a large % of your investments in the company that also supplies your salary is not healthy. If the company begins to fail, you could be laid off at the same time a large % of your investments fall in value. The more diversified you are with your investments, the less impact on your being laid off. But, again, opinions vary on the value of “large percentage.”

There is no right answer for everyone. Just consider all of this in making your own personal decision.

I am not a fan of buying individual stocks because of high risk. This is the only common stock I own because I get 15% discount per share. I would not buy this stock if I was not employed at this company. I have never lost money since I have invested in 2007. It is a very slow moving stock.

According to Personal Capital it should not be more than 3% of total portfolio.

 

[F.I.R.E User]

I sell them right away.

Oh ok. Maybe, I will start to do just that. You sell them even if it is only 1 share to sell?

 

[tulak]

Oh ok. Maybe, I will start to do just that. You sell them even if it is only 1 share to sell?

Yep. I do the same with RSU shares.

I worked for a company whose stock didn’t move forever. It took me about 10 years to say screw it, sell the shares, and then reinvest in my AA.

Beyond some fun money, I don’t invest in individual stocks.

 

[F.I.R.E User]

Yep. I do the same with RSU shares.

I worked for a company whose stock didn’t move forever. It took me about 10 years to say screw it, sell the shares, and then reinvest in my AA.

Beyond some fun money, I don’t invest in individual stocks.

AA?

 

[pjigar]

I always sold one day after my shares were eligible to be sold. I never was in a situation where I wasn’t at a profit.

+1. I had calendar entries for the sale dates! Math was very simple: 15% off minus 25% tax on 15%. So 11.25% return every 6 months so annualized 22.5%. Rinse and repeat.

The reasons I didn't hold ESPP were two fold:
1. Business risk. I am a total market kind of guy so it didn't make sense to hold an individual security.
2. You are already invested in your employer by your job. If your employer went under then you would loose your job AND your savings (however small). Unacceptable in my book.

 

[ERD50]

...

Company stock is about 1% on my total portfolio and I also get 15% discount per share.

Tell me about the 15% discount. At my former MegaCorp, and some others I was familiar with, that 15% applied to the lowest of either the start of the period, or the end of the period (our period was 6 months at the time). IOW, it was essentially a guaranteed 15% gain, more if the stock rose.

I *always* sold as soon as it hit my account. You can't get a guaranteed 15% in any other way that I know of. This isn't an investment, it's a benefit. Take it.

No one knows if your company stock will be a good investment going forward. Take the money and diversify (or spend it).

edit: What pjigar said!

-ERD50

 

[tulak]

AA?

AA = Asset Allocation.

And I agree with what pjigar and ERD50 said above. I’ve always looked at the 15% discount as a benefit too. Easy money.

 

[beernutzbob]

My wife worked for a Fortune 500 company for 35 years and from day one participated in their ESPP. Most of her shares were acquired in the 80s with the only new shares since then being due to quarterly dividend reinvestments.

We decided to sell all her shares this year and found out that their current ESPP servicer ComputerShare had no basis recorded for the bulk of her purchases. Only the shares bought using dividend reinvestment, about 20% of the shares, had a cost basis recorded in their system.

TBH the stock prices when she purchased most shares was only about 10-20% of the current market price so there was going to be substantial capital gains anyway but now we're going to pay capital gains on almost 100% of the proceeds for the bulk of the shares.

Likely the tax difference will be less than $10k but that's still money we won't have after filing taxes.

 

[F.I.R.E User]

Tell me about the 15% discount. At my former MegaCorp, and some others I was familiar with, that 15% applied to the lowest of either the start of the period, or the end of the period (our period was 6 months at the time). IOW, it was essentially a guaranteed 15% gain, more if the stock rose.

I *always* sold as soon as it hit my account. You can't get a guaranteed 15% in any other way that I know of. This isn't an investment, it's a benefit. Take it.

No one knows if your company stock will be a good investment going forward. Take the money and diversify (or spend it).

edit: What pjigar said!

-ERD50

15% discount on every share I buy.

 

[F.I.R.E User]

AA = Asset Allocation.

And I agree with what pjigar and ERD50 said above. I’ve always looked at the 15% discount as a benefit too. Easy money.

Right.

 

[mpeirce]

A lot depends on the company and your approach to investing.

My personal choice was to sell 50% of the share when they became long term capital gains.

The rest I kept.

I've been retired for just over 10 years and I'm still selling some of those ESPP shares that I kept. It worked out very well for me, but of course YMMV.