How does an Employee Stock Purchase Plan work?

What to do with Restricted Stock Units? There are at least fifteen (15) things to do besides hold onto the shares.

Why frequent RSU vests - like quarterly or semi-annual - can benefit employees, companies, and shareholders alike.

Why Employee Stock Purchase Plans can be a hidden gem - offering discounted stock and smart lookbacks.

There are risks of holding your employer’s stock - lack of diversification, it might not be as unique as it seems, and potential impacts to your other assets.

Know how RSUs are taxed - why vesting counts as income, how your share basis works, and short- vs. long-term capital gains.

Is it better to own stock or contribute to an Employee Stock Purchase Plan better?

Contributing to an Employee Stock Purchase Plan may be preferable.

Let’s compare a couple scenarios either:

• owning $10,000 of stock or

• contributing $10,000 to an Employee Stock Purchase Plan with a 15% discount and six month lookback

Scenario 1: a price increase of 10% could result in:

• Ending value of $12,941 with the ESPP versus $11,000 if holding stock

• Gain of $2,941 with the ESPP versus $1,000 if holding the stock

• Return of +29% with the ESPP versus +10% if holding stock

Scenario 2: a price decrease of 10% could result in:

• Ending value of $11,765 with the ESPP versus $9,000 if holding the stock

• Gain of $1.765 with the ESPP versus loss of $1,000 if holding stock

• Return of +18% with the ESPP versus -10% if holding stock