Hey all. My employer offers many stock benefits through RSU, ESPP, and options. I try to max out my ESPP and as a result my non retirement holdings are heavily skewed towards my employer’s stock. I’m trying to diversify and not worry about timing the market, but what do I need to consider when it comes to timing sales of the stock to avoid wash sales? Currently we are down from the highs a 2 years ago. Should I worry about wash sales relative to timing of various acquisition dates? What am I losing by making a wash sale? Thanks.
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I don’t know the rules about wash sales but surely you could just buy S&P 500 index funds to truly diversify. Only thing to consider for ESPP is that you get taxed at the income tax rate (probably higher) if you sell ESPP funds you received within 12 months, and you get taxed as capital gains (probably lower) for anything held longer. So sell the longer-held stock first.
Normally I sell all my ESPP stock as quick as possible. Several years ago my company did not have a mandatory holding period, so I always sold it immediately. I had to pay a higher tax rate on the 15% discount, but it was a guaranteed return with no risk.
Now we have a one year required holding period, which is great for lowering taxes, but adds volatility risk. Last year our stock started the year overpriced, then dropped below what I considered a fair price. I stopped selling stock at that point to hold for a fair price. We’re just now getting close to a reasonable price, but now I’m holding way too much company stock (I’ve kept buying my maximum along the way). I’m slowly starting to sell and hope to get back to my old practice of always selling by the end of the year.
On the bright side, I’ve added a little extra income along the way by selling covered calls against the shares I’m holding. In the last year I’ve made more from that than dividends on the same shares and have offset the loss on the shares I bought at the peak of the 2022 market. I would still rather sell without a holding period though.
I hold mine for 1 year then sell at the current price no matter what, then buy S&P 500.
My logic is that while my company gives me a 15% discount and pays a 4% dividend so long as the company does not lose more than roughly 19% a year I come out ahead. That said, I have a rolling $25,000 in stock and my job with that company so I am eager to diversify.
for me ESPP was the the worst thing I’ve invested into. My 401k is going great and I’ll never do espp again.
I figure as long as the value doesn’t drop below the discount purchase price in the required holding term it’s not a bad deal. If I can get 15 percent discount and the stock is still the price in the future when I sell you I’ll come out ahead out ahead.
My company stock price started dropping and I held it for when it would go up. Someone bought the company and it went private so losses become my problem.