Employee Stock Purchase Program Question

[marywantsmoney]

I used to work for a tech company. While there, I accumulated something like $5,000 in stock. It keeps growing at like 20%. It's really doing well. However, I don't really feel comfortable having that much money in a single stock.

Would you pull out now and take short-term capital gains or wait until I can take long-term gains?

[avil_saver36]

I used to work for a tech company. While there, I accumulated something like $5,000 in stock. It keeps growing at like 20%. It's really doing well. However, I don't really feel comfortable having that much money in a single stock.

Would you pull out now and take short-term capital gains or wait until I can take long-term gains?

ESPPs give you a guaranteed 17% (- taxes) return. Some people recommend to take the guaranteed return and not gamble the money away. Generally, you hold those for an year and then sell and pay the capital gains taxes at 15%. If you don't even want to take that much risk for a highly volatile stock, you sell the same day the ESPP program buys the stock. You typically get 17% returns right away and pay ordinary income taxes on that. Still the returns are like 12%, which are not shabby at all.

You do not hold stocks of a single company ever for a long time. Over a long time, you don't even hold stocks of Microsoft, Cisco, Google, Facebook and Apple. Having said this, if you tell me which tech company you worked for, I can provide some guess as to whether holding that stock is a good idea.

[snafu]

I tend to look at what percentage of total holdings any single stock represents. I would not have one single stock represent more than 5% of my total portfolio. Where is the stock held? In a brokerage account? Is it a retirement account? You need to take care that any action you take does not cause a tax penalty or burble. If it's a non retirement holding, do you have potential for offset of something losing value ? What will you invest in next?

Since the stock is doing really well, you can protect yourself by having an automatic 'sell' order for 10% of your total shares if the price drops 10% for example. Stocks do more up and down and you need to watch the particular market segment. I'm looking at holdings in oil and gas and gasping at how much, how fast their value has dropped while oil dropped yet again today. I really like these well run companies and choose to ride the monkey down believing they will again reward me for patience.

It helps to have a couple of stocks researched, assembling funds for the next purchase. I've researched two not yet purchased REITs, I'm in the assembling funds mode.

[disneysteve]

You do not hold stocks of a single company ever for a long time.

Why not? I think Warren Buffet would disagree with you and he seems to know what he's doing.

[avil_saver36]

Why not? I think Warren Buffet would disagree with you and he seems to know what he's doing.

I meant a "tech company"...and I should have added "in my opinion" (I do that diligently in almost every post)

[marywantsmoney]

The company is Fiserv. And it's just held within a taxable investment account, I believe. It's about 2.5% of my total invested assets.

[avil_saver36]

The company is Fiserv. And it's just held within a taxable investment account, I believe. It's about 2.5% of my total invested assets.

Yeah, the stock has gone almost 400% in the last 5 years. Pretty nice I am not a financial expert, but I think the P/E ratio is quite high and it cannot go any higher.

As far as the industry it is in, yes, it's still got a potential to grow (overseas - in the US, mobile banking is pretty much a norm now). Who knows how much higher it will go?

If I were you, I would sell it now.

[marywantsmoney]

Yeah, the stock has gone almost 400% in the last 5 years. Pretty nice I am not a financial expert, but I think the P/E ratio is quite high and it cannot go any higher.

As far as the industry it is in, yes, it's still got a potential to grow (overseas - in the US, mobile banking is pretty much a norm now). Who knows how much higher it will go?

If I were you, I would sell it now.

Thanks, I better do that. Is there a way I can sell it and transfer the money from my Fidelity ESPP into my Vanguard taxable investment account w/o taking capital gains tax? I reallllllyy doubt it but hopefully!!!

[avil_saver36]

Thanks, I better do that. Is there a way I can sell it and transfer the money from my Fidelity ESPP into my Vanguard taxable investment account w/o taking capital gains tax? I reallllllyy doubt it but hopefully!!!

Sorry didn't understand the question...you will have to pay the capital gains tax if you were asking how to avoid it! 15% is the best the IRS will let you off at...I would be glad to pay them that much and take the rest of 85% gains for myself.

Also, please don't take my advice to decide whether to hold or sell. Since you worked at the company, you know it better. You can ask around and do more research. I only told you what "I would have done".

[AngelineRose]

I meant a "tech company"...and I should have added "in my opinion" (I do that diligently in almost every post)

I am curious about this too as I hold stock for a high tech company who has been going strong for over 25 years.

[snafu]

Since it's in a taxable account, not a retirement account of any type, you might call Vanguard and ask if the holding can be transferred 'in kind' to your Vanguard account. Your might back back over your record of purchases and sell sufficient units to re-coup your original costs. From that point on it's all capital gains [pure profit less tax]. If you want to money for another purpose or to buy another stock you hope will rise 400% go for it!

[marywantsmoney]

Since it's in a taxable account, not a retirement account of any type, you might call Vanguard and ask if the holding can be transferred 'in kind' to your Vanguard account. Your might back back over your record of purchases and sell sufficient units to re-coup your original costs. From that point on it's all capital gains [pure profit less tax]. If you want to money for another purpose or to buy another stock you hope will rise 400% go for it!

Not sure what you mean about recouping my original costs..

[snafu]

When you initially accumulated Fiserv stock how was it paid for? Did you get 'X' shares as a bonus, did you have sums deducted from pay to buy shares at 'Y' per share cost? Were there any fees or expenses for acquiring and hold the stock? Those were all original costs. They are deducted from the value on the day you sell your stock.

[marywantsmoney]

When you initially accumulated Fiserv stock how was it paid for? Did you get 'X' shares as a bonus, did you have sums deducted from pay to buy shares at 'Y' per share cost? Were there any fees or expenses for acquiring and hold the stock? Those were all original costs. They are deducted from the value on the day you sell your stock.

I put 10% of my paycheck towards the stock which was bought 15% below market price.