Let me speak for a moment on the catalyst for why I started this site. It is something I have considered doing for many years, but felt like I lacked the necessary experience or the natural talents of writing. Recently, the open enrollment in my company was coming to an end for the employee stock purchase plan (ESPP). I started speaking with fellow employees about this and was shocked to learn that almost no one that I worked with was enrolled.
I started encouraging them to invest, but I found fear was the primary inhibitor. I spent my entire collegiate career interning at a brokerage firm. My fear of the market was removed after having so much exposure to it. I lived and survived through the 2008 turmoil so nothing can keep me from the market. Granted, there are occasionally opportunity costs such as real estate transactions, or vacations, where I believe money may be better suited at that point in time, but I have never fled from the market.
As such, I pushed my fellow co workers to sign up for the ESPP. If you are unfamiliar with an ESPP; it works like this:
A publicly traded company will include as part of it’s compensation package an ESPP. You can contribute up to the company policy or the IRS limit, whichever is less. You can read the IRS Bulletin on the limits here: https://www.irs.gov/irb/2009-49_IRB
The company will continue to make payroll deductions until the predefined purchase date. On the purchase date, which is generally twice per year; you can use the funds deducted from your payroll to purchase shares of the company stock at a discount (Many companies use 15%). So if your company’s stock closes on June 30 at $100/share; you can buy it outright for $85/share and immediately resell it in the open market for $100/share. Just be aware that there are tax consequences for turning it over so quickly; and the tax code is kind to those who hold onto the stock for at least a year.
The ESPP is a great benefit if you work for a company that is well performing. And it is my personal belief that if your company offers an ESPP; you should take advantage of it. Just make sure that you understand your specific company’s policies and procedures and that it fits your long term plans.