| Author |
Message |
Jim E (Jimpo1)
Advanced Member
Username: Jimpo1
Post Number: 2701
Registered: 7-2001
| | Posted on Friday, October 17, 2003 - 2:32 pm: | |
I gave pretty good detail as to why I sell immediately. The caps gain tax eats up the 15% discount, which effectively means it pays my taxes. I would never hold a stock because I'm afraid of the taxes. But I have also been fortunate enough that the smallest increase I've ever had over the 6 month purchase period was 38%. I don't want all my eggs in one basket, and I already have company stock options and stock in my 401k, why do I want more? If it tanks again, I already lose. To me the ESPP is simply a 6 month savings account.
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David Sorrells (Notorq)
New member
Username: Notorq
Post Number: 2
Registered: 7-2003
| | Posted on Friday, October 17, 2003 - 1:21 pm: | |
I participate in my company's ESPP. It's very similar to everybody elses here in that they take the price at the beginning of the quarter and at the end and whichever is lowest they take another 15% off.
You're better off tax wise to hold for 2 years. (I hope I'm remembering this right.) If you sell within 2 years the 15% discount becomes taxable income PLUS you have to pay short term capital gains tax on all the gains. Sell after 2 years and you just pay long term cap gains, 8 or 10% can't remember what it is right now. (I obviously haven't made any money on stocks lately, lol!)
It is definitely worth it IF you happen to work for a company that you would consider owning anyway. I'm on the fence with mine, the discounted price tips it for me however. |
Robin Overcash (Robin)
Member
Username: Robin
Post Number: 272
Registered: 1-2003
| | Posted on Thursday, October 16, 2003 - 5:36 pm: | |
Not sure I see the point of selling immediately... the cap gains tax will eat up the 15% discount, and then some. Unless your stock went through the roof, it seems like you'd be better off holding it.
-R |
Noelrp (Noelrp)
Member
Username: Noelrp
Post Number: 341
Registered: 8-2001
| | Posted on Thursday, October 16, 2003 - 4:52 pm: | |
ESPP is great. I love it.
Max out your contribution if budget permits. I dont see any disadvantage of it. It's a win/win situation. |
Jim Schad (Jim_schad)
Intermediate Member
Username: Jim_schad
Post Number: 1989
Registered: 7-2002
| | Posted on Thursday, October 16, 2003 - 3:49 pm: | |
must be nice to work for a company that actually makes money! we have negative eps every quarter and our P/E ratio is 0. Nice! |
Jim E (Jimpo1)
Advanced Member
Username: Jimpo1
Post Number: 2692
Registered: 7-2001
| | Posted on Thursday, October 16, 2003 - 3:46 pm: | |
If yours is like mine, they take the price at the beginning of the period and at the end, then you buy at a 15% discount from whichever price is lowest. My stock purchase plan helped pay for my Ferrari. The lesson I learned was to SELL it the day you get it. The very first time I got my stock I was trying to sell over the phone while on the road. My cell battery died so I figured I'd do it the next day. The next day, the stock dropped by 50%. A fluke for sure, but still my money. I've made money ever since. The last round I was up about 80% in 6 mos. My advice would be to max it out. I do! |
Ken Thomas (Future328driver)
Member
Username: Future328driver
Post Number: 660
Registered: 12-2001
| | Posted on Thursday, October 16, 2003 - 1:48 pm: | |
On of the disadvantages is that by participating in the plan, you may become subject to the alternative minimum tax (AMT).
The other proplem is that if you can only do block purchases at 6 month intervals, you dont get the advantage of dollar cost averaging like you would with a regular paycheck deduction like for 401(k).
Another thing, the 15% discount may be counted as some sort of income even before you sell and have to deal with capital gains.
You might want to talk to the benefits rep for your employer to see what kind of tax consequences it could have. |
Jim Schad (Jim_schad)
Intermediate Member
Username: Jim_schad
Post Number: 1982
Registered: 7-2002
| | Posted on Thursday, October 16, 2003 - 1:48 pm: | |
we have the same plan here. what happens if stock drops below price you paid? well I guess if you sell immediately after they buy then you never have any lag time. |
Taek-Ho Kwon (Stickanddice)
Intermediate Member
Username: Stickanddice
Post Number: 2227
Registered: 11-2002
| | Posted on Thursday, October 16, 2003 - 1:43 pm: | |
When is the stock being purchased? Also, as you mentioned, cap gains tax will definitely take away from your earnings.
Depends on the company, but I did it for the one I worked for during the tech boom and it was pretty good to me.
Best of luck!
Cheers |
Dom Vitarella (Dom)
Member
Username: Dom
Post Number: 500
Registered: 11-2002
| | Posted on Thursday, October 16, 2003 - 1:09 pm: | |
My employer will be offering one beginning Nov 1. basically, it will allow me to purchase up to $25,000/year (payroll deduction) in 6 month intervals at a 15% discount.
So far, it sounds good. They do a payroll deduction for 6 months, buy the stock at 15% discount, then I call sell it immediately to make 15%. That means, potentially annualized returns of 30%.
Are there any disadvantages? This almost seems too good to be true.
Certainly, I will get taxed on the proceeds, but what other disadvantages exits. Is it really that good?
Dom |