If your company offers ESPP 15% discount, 2y look back, 15% max of your salary. You can sell right after vest. What your strategy sell (right after vest) or hold to meet qualifying sale ( tax favor) ? or what else you can do regarding trade off between risk vs diversify ?
notice that company stock not a lot of volatile but also not a lot of growth per historic data.
#box #personalfinance #investment
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There is no correct answer. If you expect your company to beat the market, hold. If not, sell. If unsure, sell.
Don’t worry too much about taxes on ESPP. You’ll have capital gains tax when you sell, short term or long term. Holding long term (more than 1 year) saves you some taxes. But if you’re in a state like California where capital gains get the same treatment, long or short, you’re not saving a ton of money by holding long. You’d rather invest in something that has a higher growth potential and covers for the additional taxes you owe by selling immediately.
Note: I'm not familiar with look backs so my bad if this is inaccurate.
If you believe the company will grow (to your satisfaction) in x months/years, hold it. If you want to reinvest the money in another stock because you believe it will grow faster, do that. If you're risk averse and don't want to deal with individual stocks, reinvest in an index fund/ETF.
Holding doesn't give any tax benefits at the price you receive the shares at. You are still paying all income/short-term tax for your the difference between market and strike price. The only difference with holding is that if you hold long-term, you will get taxed at the long term capital gains rate. But selling immediately, reinvesting in another stock/fund, and selling that a year later is the exact same thing.
2y look backs - the lowest fmv price will be locked for last 2y etc..