Excess 401k, or ESPP, or IRA ??

[Skeeter]

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.

 

[Webzter]

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)