Many companies offer their employees company stock as part of their compensation package. This can make employees feel more invested in the company’s success. If you’re not a shareholder, you might not feel as motivated to go above and beyond in your work. Since starting my career in 1999, I’ve always received company stock as part of my compensation. It feels good to own a piece of the company, but not all company stocks are created equal.
It’s important to regularly sell some of your company stock. Here’s why:
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Diversification: Your career is already tied to your company’s success. If you also own a lot of company stock, you’re putting all your eggs in one basket. If the company does poorly, you could lose your job and your investment. So, it’s wise to sell some of your stock to diversify your investments.
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Passive income: Selling your company stock can generate passive income, especially if your company doesn’t pay dividends. You can reinvest the proceeds into assets that generate passive income, like dividend-paying stocks, REITs, bonds, and real estate.
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Quality of life: Selling company stock can provide funds for things that improve your life today, like vacations, a safe car, a nice home, or your children’s education. There’s no point in saving and investing if you’re never going to spend it.
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Taxes: With Restricted Stock Units (RSUs), you’re taxed when the shares vest. If the value of your stock drops before you sell, you could face a hefty tax bill. Selling your stock as it vests can help manage your tax liability.
I’ve always sold my company stock each year. From 2001 to 2012, I worked at Credit Suisse and sold my vested shares each year to invest in real estate. In 2012, I left the company and continued to sell my stock each year. Even though the share price was lower, I wanted to diversify my investments.
In 2023, Credit Suisse’s share price dropped to an all-time low. I’m glad I sold my stock when I did. It’s a reminder to be careful about which company you dedicate your life to. If you choose the wrong company, you could waste a lot of time and money.
Even if your company’s stock price continues to rise, it’s still a good idea to sell some of your stock each year. No matter how confident you are in your company, unexpected events can cause setbacks. In recent years, companies like Meta and Silicon Valley Bank have seen their stock prices plummet.
If you’re bullish on your company, consider selling enough stock to buy things that provide value today, like a house. The memories you create in your house are priceless. Plus, as your company does well, your salary and the value of your remaining shares will continue to increase.
Each year, take a realistic look at your company and industry. It’s easy to get caught up in the hype and overlook potential risks. I left banking after 13 years and started my own online business, which has been a great decision.
However, new challenges are always on the horizon. With the rise of artificial intelligence and short-form content, it might be a good idea to sell some of my company’s stock and diversify. But for now, I’m not motivated to sell because I don’t need the money and my net worth is already diversified.
Do you regularly sell your company stock? Have you ever regretted selling? What do you buy with the proceeds? With mortgage rates dropping, I’m bullish on real estate. I’m also investing in the Innovation Fund, which invests in artificial intelligence, data infrastructure, DevOps, FinTech, and PropTech. I’m particularly bullish on artificial intelligence.
Remember, company stock is just one part of your total compensation. Treat it like any other investment and do your due diligence.
