my employer just started an ESPP (employee stock purchase plan) that offers stock at a 15% discount. from what i understand, if i sell right after the shares vest, i’ll get around a 15% gain (minus taxes) automatically.
is this a good strategy? in general, what’s the best way to make the most of an ESPP?
check for any restrictions—some ESPPs require you to hold the stock for a year before selling. my ESPP has that rule, so i wait to pay long-term capital gains taxes instead of short-term. see if your plan has any limits that might impact your approach.
@Halston
some plans also have a fee to sell. selling every pay period could add up if you’re charged each time, so it may not be practical depending on the rules and your company’s stock performance.
my old company had a 15% discount too, and we could sell monthly, so it worked out as a 2.25% salary bonus. my current company only allows sales quarterly with a 10% discount, so it’s not worth it for me now. details can really affect how much value you get.
@Jai
mine uses the lower of the stock’s price at the start or end of the quarter for the discount, so if it goes up, you get a bigger gain. no risk as long as i sell the day i get it.
check your plan terms closely. some require a minimum holding period before you can sell, and the discount is typically tied to the stock’s price during a set period. mine is offered quarterly, and i have to hold it for 12 months, so i opt out to avoid tying up my money and depending too much on my company’s performance.
my company offers a 25% match, and i can sell every quarter with no specific holding time. that setup makes it worth it since i can profit as soon as the stock’s available.
it’s a great deal with almost no downside if you can sell right away. i put as much as possible into my ESPP because there was little risk and potential for solid gains.
Uriel said:
it’s a great deal with almost no downside if you can sell right away. i put as much as possible into my ESPP because there was little risk and potential for solid gains.
depends on the plan and company. if your stock’s tied to quarterly earnings, there’s a risk it could drop right when you get it. not all plans let you sell immediately, so be sure to check all the conditions.