If you worked at a phone store and they provided a heavily discounted phone plan for employees, you’d take them up on it.
But if you work at a tech company and they provide an Employee Stock Purchase Plan, you are probably not participating in it.
Why? These are equivalent.
Why don’t you get involved.
Because it’s risky
It’s possible for the company stock to drop. But odds are, the company stock doesn’t drop.
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Because it locks up money
It does lock-up money, but let’s consider the return on investment. You lock up money for an average of 1.5 months to get an 11% return. When you compare this to a CD that requires a 12-month lock-up for a 5.87% return, ESPP looks incredible.
Because of taxes
But I’ll owe a bunch of capital gain taxes.
False. If you sell the day you receive the stock, you will be selling at the same price you bought them at, so there will be no capital gains tax.
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So what are you waiting for?
Maximize your employee perks and purchase as much ESPP as possible, selling as soon as possible, to earn an easy return.
Doing this at Microsoft, I earned $2,700 a year.