What goes up can go down...
If NVIDIA falls over the next few years, how will you feel?
My employer hasn't had quite the recent run that Nvidia has, but it's still been a good run...
I benefit from any stock appreciation from the time of grant to the time of vest - in my case over 5 years. And assuming you get annual grants, that's a "rolling" vest period - which means you continue to benefit from (or be punished by) changes in the market during the vest cycles.
But at time of vest, I pull those chips off the table. If the stock keeps going up, my unvested shares continue to benefit nicely - so it's not like I don't have upside (OK, less as I sold the vested shares). Conversely if the stock goes down, especially down hard, I'm very glad I moved money into something "more reliable" like a Total Stock Market fund.
Having said that, I should note that I do own some employer shares... Some I owned before I started, the rest were early RSU & ESPP shares - from before I found BH and new better than owning individual stocks. At one point, I owned more employer stock than all other assets combined - aka huge "consolidation risk". If the stock crashed (which is always possible), my financal well being would have been decimated.
Once I realized this (after finding BH), I started selling all new shares and turned off dividend reinvestment to not make the problem worse. Then I started aggressively selling off shares, and paying the painful taxes to do so, until my % of assets was too a more tolerable level. I'm not quite to where I want it to be, I still have more exposure than I'd like (think I'm down to < 15%, which if it crashed by 50% - would only be a 7.5% loss - painful but doesn't really change our outcome/plan).
All the shares left have very large gains... I'd sell more, but I'm in my highest earning years, hopefully my last few working years, and my projection is that the % should be less than 10% of my assets by "retirement" (in a few years hopefully - and again a 50% crash would only have a 5% impact), and if we "retire early" I can get the % down much further/faster/more cost effectively in low-/no-tax years. My goal is to be at < 5% within 5 years of retirement. Once there, I'll be optimizing withdrawals to balance Roth conversions, ACA Subsidies, tax brackets, etc.
In other words, if you want to hold "some" employer stock - understand it's a "risk", and the guidance is to minimize that risk (ideally < 10% of your portfolio). If that helps you justify diversifying the rest - count it as a win...
If NVIDIA falls over the next few years, how will you feel?
My employer hasn't had quite the recent run that Nvidia has, but it's still been a good run...
I benefit from any stock appreciation from the time of grant to the time of vest - in my case over 5 years. And assuming you get annual grants, that's a "rolling" vest period - which means you continue to benefit from (or be punished by) changes in the market during the vest cycles.
But at time of vest, I pull those chips off the table. If the stock keeps going up, my unvested shares continue to benefit nicely - so it's not like I don't have upside (OK, less as I sold the vested shares). Conversely if the stock goes down, especially down hard, I'm very glad I moved money into something "more reliable" like a Total Stock Market fund.
Having said that, I should note that I do own some employer shares... Some I owned before I started, the rest were early RSU & ESPP shares - from before I found BH and new better than owning individual stocks. At one point, I owned more employer stock than all other assets combined - aka huge "consolidation risk". If the stock crashed (which is always possible), my financal well being would have been decimated.
Once I realized this (after finding BH), I started selling all new shares and turned off dividend reinvestment to not make the problem worse. Then I started aggressively selling off shares, and paying the painful taxes to do so, until my % of assets was too a more tolerable level. I'm not quite to where I want it to be, I still have more exposure than I'd like (think I'm down to < 15%, which if it crashed by 50% - would only be a 7.5% loss - painful but doesn't really change our outcome/plan).
All the shares left have very large gains... I'd sell more, but I'm in my highest earning years, hopefully my last few working years, and my projection is that the % should be less than 10% of my assets by "retirement" (in a few years hopefully - and again a 50% crash would only have a 5% impact), and if we "retire early" I can get the % down much further/faster/more cost effectively in low-/no-tax years. My goal is to be at < 5% within 5 years of retirement. Once there, I'll be optimizing withdrawals to balance Roth conversions, ACA Subsidies, tax brackets, etc.
In other words, if you want to hold "some" employer stock - understand it's a "risk", and the guidance is to minimize that risk (ideally < 10% of your portfolio). If that helps you justify diversifying the rest - count it as a win...
Statistics: Posted by SnowBog — Thu Feb 22, 2024 1:40 pm — Replies 33 — Views 2288