Author Topic: Help me avoid "80k Knee Jerk Reaction"  (Read 1553 times)


  • Stubble
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Help me avoid "80k Knee Jerk Reaction"
« on: November 18, 2014, 07:02:05 AM »
I am new to the forum and overwhelmed with the amount of information this place provides.  Over the next few days I hope to build a complete case study, but do want to to ask a specific question regarding my ESPP.

My current age is 44, I have been contributing to my 401k 8%+5% company match.  I am also placing 4% after tax into my ESPP plan which is currently holding 80k of qualified funds.  I am debt free outside of my mortgage and thinking I should protect some of these funds. My investment knowledge is terrible, but I have saved for my future.  I am learning, but like many others overwhelmed the past few weeks tackling all of this information.

My goal with the ESPP plan was to set aside money for my sons college.  I am learning from other post, but getting uncomfortable with the amount I have in my company stock.  With the amount of dollars in this account, I'm am wondering the following:

Leave these funds alone which are currently doing well?
Move some of these funds to specific college fund for my son (4 years to college)?
Invest a portion of these dollars for my future retirement?
Back off my ESPP investment and increase 401k contribution? 
Start selling qualified funds immediately moving forward maintaining my current 4% investment into the ESPP?
Pay off a chunk of my mortgage?

If you have any specific links, recommendations, suggestions I would appreciate your feedback.

Dr. A

  • Stubble
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  • Location: Massachusetts
Re: Help me avoid "80k Knee Jerk Reaction"
« Reply #1 on: November 18, 2014, 07:28:28 AM »
The most important thing to remember about owning company stock is that your entire paycheck is already dependent on how well your company is doing. If your industry took a nosedive over the next six months, your ESPP may be cut in half and then you get laid off and lose your income too... Bad. News.

Rule #1 of investing is diversification, and hanging on to lots of company stock violates it. In my opinion, this only makes sense if your title starts with the word "Chief", because then the direction of the company is actually on your shoulders.

That said many of us (including me when I had a corporate gig) take advantage of company stock discount programs, in to take advantage of the very large (in terms of annualized %) and short-term gain.

Bottom line, my advice to anyone is to sell all ESPP shares the moment they become vested, and don't even think of holding them any longer than that. You can still contribute enough to maximize your gain with regard to any discount, but no more than that.

What to do with that money after... well, that's a longer discussion, and I'm sure others will chime in.