Thoughts on Company Stock Purchase Plans? The Stock is ED

[irie]

My job has a company stock purchase plan. Generally speaking is it a good idea to purchase company stock at this discounted rate? It does pay dividends. The company stock is ED.

For each $9 invested by an employee, the Con Edison companies will contribute $1 to the purchase of the Shares.

Also,

... purchase Shares without any fee, commission or charge payable by them, other than the purchase

[Million2000]

My job has a company stock purchase plan. Generally speaking is it a good idea to purchase company stock at this discounted rate? It does pay dividends. The company stock is ED.

For each $9 invested by an employee, the Con Edison companies will contribute $1 to the purchase of the Shares.

Also,

... purchase Shares without any fee, commission or charge payable by them, other than the purchase

I participate in my company's employee stock purchase program. I can't say it's the best investment ever and I don't recommend putting more than 5% of your portfolio in there at one time but overall I've had a pretty good return. I try to get rid of the shares as quick as I can to lock in that discount because individual companies can have very volatile share prices. I still own a couple offering periods of shares that are down 40%. I think in the end I use it as my "gamblin'" money because I watch the shares and will sell them if there is a spike in price. I did that 2 years ago and made out like a bandit on the money I put in.

[irie]

I participate in my company's employee stock purchase program. I can't say it's the best investment ever and I don't recommend putting more than 5% of your portfolio in there at one time but overall I've had a pretty good return. I try to get rid of the shares as quick as I can to lock in that discount because individual companies can have very volatile share prices. I still own a couple offering periods of shares that are down 40%. I think in the end I use it as my "gamblin'" money because I watch the shares and will sell them if there is a spike in price. I did that 2 years ago and made out like a bandit on the money I put in.

Thank you for the reply.

So none of my 401k contributions go toward company stock at the moment. I contribute the max $18k per year (hyper saver). Company matches 100% up to 6%.

I'm looking to understand how much should one purchase given the above to take advantage of the 10% stock purchase benefit. If at all.

[MDM]

My job has a company stock purchase plan. Generally speaking is it a good idea to purchase company stock at this discounted rate?

Yes, usually "as much as possible" is the correct amount - provided you then sell what you purchased and reinvest the proceeds in something more diversified.

[ixtap]

My job has a company stock purchase plan. Generally speaking is it a good idea to purchase company stock at this discounted rate?

Yes, usually "as much as possible" is the correct amount - provided you then sell what you purchased and reinvest the proceeds in something more diversified.

+1

We participate, but we sell immediately. Your quotes don't mention any limits, but they are common in these programs.

[irie]

My job has a company stock purchase plan. Generally speaking is it a good idea to purchase company stock at this discounted rate?

Yes, usually "as much as possible" is the correct amount - provided you then sell what you purchased and reinvest the proceeds in something more diversified.

+1

We participate, but we sell immediately. Your quotes don't mention any limits, but they are common in these programs.

How long do you wait to sell?

[Skills Barterer]

My company does this and you have to hold the shares over 1 year or the free % is taxed as normal income.  My company also pays a 2% dividend, so I'm holding shares to avoid paying any taxes until I have a better tax strategy... might be holding them until I retire... uggh.  I contribute the max allowed by my company. 

[ixtap]

My job has a company stock purchase plan. Generally speaking is it a good idea to purchase company stock at this discounted rate?

Yes, usually "as much as possible" is the correct amount - provided you then sell what you purchased and reinvest the proceeds in something more diversified.

+1

We participate, but we sell immediately. Your quotes don't mention any limits, but they are common in these programs.

How long do you wait to sell?

As quickly as eTrade can process the transaction, usually. If we get caught in meetings it might be the next day after they are available. We set up a calendar reminder for the buy date so that it doesn't slip by.

[Spitfire]

My job has a company stock purchase plan. Generally speaking is it a good idea to purchase company stock at this discounted rate?

Yes, usually "as much as possible" is the correct amount - provided you then sell what you purchased and reinvest the proceeds in something more diversified.

I do this as well. Ours is a 15% discount on the share price at the beginning or ending of the 6 month period, whichever is lower. I always gain at least 15%, and if the price starts low and goes up over the 6 months I get more (once in a while it is a lot more). I then sell it right away and flip it into an index fund. 

[runewell]

As long as you can sell the stock, I would buy as much as I can.
That being said, I'm sure there are limits. 

I contribute 10% of my pay every two weeks.  Twice a year I get the shares at a 15% discount.
So my rate of return is 15% each time, and since the funds are accumulated over a 6-month period, on average they are only held 3 months.
That would make the return 1.15 ^ 4 - 1 = 74.9%

However it's not quite that lucrative.  State and federal taxes are about 23%, reducing the return to 74.9 x 0.77 = 57.6%

It's also a bit worse than that because (1) a tiny amount sits dormant since I can't purchase fractional shares, (2) they charge a small fee for the stock sale, and (3) my money spends about a week in transit as the stock is sold and the check is mailed and deposited.  Still, who wouldn't max out what is basically the easiest 50% rate of return ever?  And if you sell immediately there is virtually zero risk.

[ixtap]

As long as you can sell the stock, I would buy as much as I can.
That being said, I'm sure there are limits. 

I contribute 10% of my pay every two weeks.  Twice a year I get the shares at a 15% discount.
So my rate of return is 15% each time, and since the funds are accumulated over a 6-month period, on average they are only held 3 months.
That would make the return 1.15 ^ 4 - 1 = 74.9%

However it's not quite that lucrative.  State and federal taxes are about 23%, reducing the return to 74.9 x 0.77 = 57.6%

It's also a bit worse than that because (1) a tiny amount sits dormant since I can't purchase fractional shares, (2) they charge a small fee for the stock sale, and (3) my money spends about a week in transit as the stock is sold and the check is mailed and deposited.  Still, who wouldn't max out what is basically the easiest 50% rate of return ever?  And if you sell immediately there is virtually zero risk.

Ours is even easier than that: it is a transfer from DHs program eTrade account to his regular taxable account, minimizing the time for buying and selling.

I just checked, for his plan there are two limits: a percent of salary and a cap. Until we reach that cap, we have 15% "forced" savings by participating, plus the earnings from the preferred pricing.

I understand that some people can't afford to forego a chunk of their paychecks for six months, but I think any mustachian with an established emergency fund would do well to take a close look at their ESPP. In this case, the program makes us as at least as much as the 401k match. Obviously, this isn't a substitute, since it doesn't have any tax advantages, but it is usually a very good short term investment.

[Skills Barterer]

As long as you can sell the stock, I would buy as much as I can.
That being said, I'm sure there are limits. 

I contribute 10% of my pay every two weeks.  Twice a year I get the shares at a 15% discount.
So my rate of return is 15% each time, and since the funds are accumulated over a 6-month period, on average they are only held 3 months.
That would make the return 1.15 ^ 4 - 1 = 74.9%

However it's not quite that lucrative.  State and federal taxes are about 23%, reducing the return to 74.9 x 0.77 = 57.6%

It's also a bit worse than that because (1) a tiny amount sits dormant since I can't purchase fractional shares, (2) they charge a small fee for the stock sale, and (3) my money spends about a week in transit as the stock is sold and the check is mailed and deposited.  Still, who wouldn't max out what is basically the easiest 50% rate of return ever?  And if you sell immediately there is virtually zero risk.

Ours is even easier than that: it is a transfer from DHs program eTrade account to his regular taxable account, minimizing the time for buying and selling.

I just checked, for his plan there are two limits: a percent of salary and a cap. Until we reach that cap, we have 15% "forced" savings by participating, plus the earnings from the preferred pricing.

I understand that some people can't afford to forego a chunk of their paychecks for six months, but I think any mustachian with an established emergency fund would do well to take a close look at their ESPP. In this case, the program makes us as at least as much as the 401k match. Obviously, this isn't a substitute, since it doesn't have any tax advantages, but it is usually a very good short term investment.

I got the the max with a ladder.  Each offering period I increased the % until I hit the max.