I am trying to figure out if we should investment in my husbands Employee Stock Purchase Program more heavily, or even consider investing in his Company's Employee Loan Program. (My DH just received a promotion and is now allowed into the Employee Loan Program, which we have never accessed before.) He's being strongly encouraged to consider it as a "good deal".
Background: DH has worked for the company since 2008 (8 years ago exactly this month). He has been contributing the minimum $25/paycheck to the program since then, so $5,200 of his own contributions...and the value of his stock account was $11,926 as of December - and the stock is up slightly from year end. It has been one of our better performing investments. Our overall net worth is approximately $1.15 million. I believe we should not have more than 10% exposure to the Company overall, since he is also employed there. He also receives ER stock in his 401(k) match, and the value of that stock is $58K. Combined this is $70K. So we could invest $45K more and only have it be 10% of our net worth. The company is growing, and recovered quickly from the last 2008-2009 drop.
Details of the Plans....
Stock purchase plan - Anyone may purchase during the year, minimum amount is $500, or $25/per paycheck - 10% bonus on the number of shares increase over the prior year, measured at 12/31. The bonus is paid on 3/31.
Stock loan program - Minimum loan $10,000. Interest is charged at 3% annually. There is a 5% bonus on shares in initial year of purchase. DH can borrow up to $150,000. There is also the potential for additional bonus share on the loan program, but only if the company meets certain growth targets: Since 2011, the additional amount has varied between 3-5% additional bonus.
I could see doing a couple different options, getting progressively riskier:
1) Invest an additional $1,500/month in the stock purchase program in one off purchases as we have money available until we hit that 10% of net worth balance.
2) Borrow $45,000 under the loan program with the 3% interest option and payoff the loan with $1,500/mo as available (there is no prepayment penalty for the loans).
3) Borrow from our 401(k)s in December 2016 $100K (4.25%), buy stock with the loans, get the 10% stock bonus on 12/31, then sell that stock in January when he is able to and pay back the 401(k) loan. Each company has a $50 loan fee, but spending $100 to make potentially $10K in a month is tempting. This would only work every other year....Yes, there is a risk the stock could go down more than 10% between December and January negating the return.
Feedback would be greatly appreciated....