Hey all, just want to get some input if there's anything I might be missing with the stock purchase plan my employer is rolling out soon.
- Contribute up to 10% of salary (~$3500 for 6 months for me)
- Contributions are in blocks of 6 months during which you can only decrease or cancel contributions (no increase)
- At end of 6 months, your contributions are used to purchase company stock at 10% discount of whichever is lower of the 1st or last day of the 6 months. Discount is treated as taxable income (25% rate for me).
- Shares can be sold as soon as they are purchased (not counting the few days it will probably take to process)
- Fees for selling are: $5.35+ .03/share (shares should be worth $5-10 if I had to guess) or $29.95, whichever is higher. For me the $29.95 will be higher unless I get a pretty hefty raise soon or the stock drops hard.
The way I see it, even in a worst case scenario where the stock is purchased at the price at the end of the 6 months, I'm making $350*.75-$29.95=$232.55 twice a year. Capital gains tax should be minimal as I'll sell right away (unless the stock has increased over the 6 months and the purchase price is based on the first day, which I'm of course just fine with). There is the possibility the stock could tank in the few days it takes to process the sale, but there's also the possibility the stock will be up compared to the beginning of the 6 months, and I'll get it at more than a 10% discount. If the stock does tank hard after the purchase date, I'd be bummed, but not going to the poor house by any means. This is an energy company, so the potential for crashes is there, but I'm comfortable with that risk.
Anything else I should be looking out for here? I'm seeing an almost guaranteed (except those few processing days) 13.2% annual return, with a pretty good shot at getting more if the stock generally goes up.