Laura Tanner, PhD, CFP®
Through the author's personal example, this article presents the dangers of a concentrated stock position, discusses why diversification may be hard for employees with shares from equity compensation, and explores strategies for preserving your net worth.
Geoffrey M. Zimmerman, CFP®
Executives, as corporate insiders, must perform a delicate balancing act to meet the needs, demands, and perceptions of the various constituencies interested in their company's stock. This article looks at these concerns and explores ways to manage them that can improve the chances of achieving financial goals.
Robert J. Pyle
While you may have great faith in your company's stock, you also need to diversify your investment portfolio. For employees with stock options, doing this successfully requires a careful analysis to figure out the optimal times to exercise and sell.
Once you have settled on a comfortable ownership percentage of company stock in your combined holdings, how do you decide which shares and options to hold and which to sell?
W.E.B. Bantling, with Bruce Brumberg
The biggest challenge I face when counseling my clients is convincing them to avoid owning too much of their company's stock. Tales about employees of Lehman Brothers or Enron who lost their entire net worth have shaken these clients to attention.
Many of my clients do not see stock compensation in the bigger picture of retirement savings and withdrawal plans. Considering net worth, age, and company stock plan, I present the client with these core points about stock grants, 401(k) plans, nonqualified deferred compensation, and IRAs.
Having both nonqualified stock options and nonqualified deferred compensation gives you a tremendous amount of flexibility to optimize your financial planning and tax situation. In this article, I explain how I have used the two plans in concert with one another.
On Wall Street
Many executives hold far too much of their company stock but do not want to sell it, as they feel the stock price may rise again. Prudent diversification requires overcoming these and other psychological hurdles. (Registration is required.)
Experts disagree on what the "proper" amount of company stock is. Figure out how dependent you are on your company's stock, the different places you own it, and whether/how you can diversify.
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When you retain shares acquired through stock compensation or an ESPP, you are subject to the advantages and disadvantages of being an owner of the company. By owning stock, you are subject to both market risk and...
We can't give you specific advice on this. We can give you some guidance on how to think about the answer either on your own or with a financial advisor...
Diversification is a sound practice in building and preserving personal wealth. If, along with stock options, you also own your company stock outright, settle on a comfortable ownership percentage...
Stock ownership guidelines specify how much company stock you must own in total or as a multiple of salary. Most companies count in the calculation the...
Although stock ownership guidelines are more common, retention mandates and requirements for CEOs and senior executives have become popular, as shown by survey data and corporate proxy statement disclosures. Supporters of share retention rules believe they show...
What you need to consider depends on your stock option plan, personal financial goals and risk tolerance, and complex tax rules, including...
Let's look at the various tax permutations for nonqualified stock options (NQSOs)...
A concentrated stock position occurs when a significant chunk of your net worth is tied up in a single stock. Strategies for hedging, diversification, and liquidity include...
SEC Rule 10b5-1 now provides an affirmative defense...
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