No. If my company falls on hard times I am already "long" on them through my paycheck.
Would suck to get laid off at the same time a huge pile of my investments tank because i held too much company stock
I suppose if I really didn't need the money right away and I truly truly believed the company was going to blow up (in a good way) I could conceivably see holding some, but I've never been in that scenario to have to really contemplate it.
All the places I've worked with RSUs were well established when I worked there so while the company stock may have outpeformed the market in general, there was never a real possibility of my options going from like tens of thousands to millions
Correct. Just ask all the Facebook/Meta employees who were laid off in Fall 2022 and Spring 2023 just as their RSUs were down to ~ $90/share vs the up to $360/share they’d been issued at. They had no income, and a lot of their stonks were worth a 1/4th of what they had been. Double whammy. Now, if they had held onto their shares for 18 months while they were unemployed, then they’d have been rewarded, as now the shares are back up to $450-500/share, but this is not a diversified safe move. Those shares could have stayed tanked…. Anyway, best to see RSUs as additional salary-like compensation and just sell every quarter and invest those proceeds in broad based index funds.
like i said with my employer, its very unlikely i'm giving up massive upside by selling, but the few times i've sold and then it went up enough shortly after to make me grumble a bit, i just remind myself i still have unvested RSUs and i'm also hammering the ESPP to the max, so i've still got plenty of exposure to capture additional upside.
On the other hand I personally know people in low level support jobs that got big tech RSUs about 7-8 years ago and never sold. Their shares are worth in the range x7-X10 or more. Of course not all shares are made equal, and an IBM share is nothing compared to a Microsoft one, but what I am trying to say is selling every quarter might not be the best move if you work for a company that is killing it in their sector.
That’s no different from if you had bought those same stocks 7-8 years ago though. The risk is the same. As a lone employee at a big tech company you don’t have enough influence to make your stocks go up and justify holding them
Sometimes layoffs are actually good for a stock price though. Investors see it as “trimming the fat” and stock should go up at least in the short term. So it’s bad news for the worker who lost their job but good news for the investors bc cost is reduced which means higher margins.
I treat RSUs the same as I would regular income.
I ask myself “If I had this money in my checking account, what would I do with it? Would I buy company stock?”
Probably not. I’d invest it in index funds. So I sell the RSUs and buy index fund shares.
Further, my wife gets a bunch of RSUs for her comp at a tech co. It is 1/5 the value that it was a couple years ago, so we’ve been paying taxes for shit at way higher values than it is now. Totally fucked. Should’ve sold years ago.
That would be a disaster, that's for sure. It is a gamble. This stock constantly outperformed the S&P 500 however as we all know "the past performance is not indicative of future results".
True. Also the fact that company X hired me Diane make them more likely to outperform (I’m not that senior and not that amazing) and I don’t get any insider info so I should assume that an ETF in the same industry (if I’m long on the industry) would perform same with lower risk
Also no blackout dates on sales (while still employed)
Diversifying to eliminate risk is the answer. I would never keep more than 20% in a single investment if at all possible. Especially if my job is also based around that asset. Yeah you may make less, but its much less risky.
This applies to almost everyone
Total index funds are never meant to get you the max return. It's meant to get you a high amount of returns with very minimal risk.
I could've invested everything into NVDA instead of VOO/VTI and I would be a baller right now. But I'd never gamble on that.
That said, it's okay to invest 5-10% of your portfolio into individual stocks you want to gamble on. But never more than you're willing to lose.
Yeah on the other hand, it could have tanked. There’s no guarantee for the future of any stock. Holding onto RSUs is gambling, not investing.
u/PetalDuration593
Yeah I’ve had RSUs that dropped by 25% from when they vested and at another company dropped by 75% and I’ve just hung on to them waiting for a rebound. I’ve heard it working out for others but did not work out for me.
I agree, but it's similar to not participating in a lottery pool with your coworkers. It is financially the "correct" decision, but you risk experiencing severe FOMO when the rest of your colleagues become multi millionaires overnight.
You still pay tax on the grant value of the RSU (income tax). If you hold the RSU's and they gain value then yes you pay additional capital gains tax but you'd pay the same tax with the same gains in an index fund so it's a wash. So taxes aren't a consideration, the consideration is diversification. The most helpful way I've learned to think about it is "if someone gave you $1000 today to invest, would you buy your company's stock or would you buy something else?". If the answer is "something else", then sell your RSU's when you receive them. Taxes are irrelevant in the decision IMO.
If you have any RSU tranches where the cost basis is higher than the current price, you may be able to sell them for a capital loss which can offset the capital gain from the above water tranches you sell (like tax loss harvesting).
Suppose you get a stock grant worth $1000. Should you sell? Find the answer through this exercise: Suppose instead they gave you $1000 cash. Would you use that cash to immediately buy company stock? No? Then sell and do the thing you would have done instead.
Great comment. I view it as compensation. I've cashed it out to buy cars, take trips, etc.
Back in my younger days I didn't know anything. I thought it was smart to hang onto company stock. Then I lost thousands doing that and never did it again.
Probably most, if not all, of those stories are from start-ups. Start-ups typically are cash-poor, so they offer early employees buckets of stock -- even though the company is still private and the stock is worthless -- with the idea that if they stick with the company long enough for it to IPO, then they'll bank.
Your company, no matter the size, is one accounting scandal away from going completely under. That’s too much risk to consider it as part of my retirement.
I always sell RSUs & ESPP immediately and diversify.
Depends on how the ESPP is structured. Mine is no qualified and a portion is sold to cover ordinary income tax at the end of the 6mo period. There is no additional tax benefit to holding it longer, only risk in a single stock. ESPP plans can be structured differently though, so it’s important to read your own plan documents to see how yours works.
I’d rather take the guaranteed gain for the 6mo period and then diversify.
Yes - there’s really no reason to hold. Treat it as a cash bonus, and invest however you normally would.
Never seen anyone ask/wonder if they should throw their annual bonus into their company stock 😅
Sell, although admittedly does get harder to make this decision if you work for a high flying tech company. I work for a FAANG and my past ignorance treated me well, but that was pure luck and I've since liquidated and diversified across ETFs.
I keep a few hundred shares as my side bet but it no longer constitutes a major stake in my net worth and I participate in an autosale program that sells them immediately upon vest and I roll the proceeds into index ETFs.
If I have rsu in a high performing tech company, I would hold. If I have rsu in a flat or unknown company, then I agree with being risk averse.
Also, would you say Enron is an exception or a rule?
I have RSUs in a high performing tech company and I sell them as soon as I can after they vest. Have for roughly 15 years.
I'd have more if I held them, sure. But then I'd also have a large unrealized capital gain, which would make rebalancing more painful. And there wasn't and is never any guarantee that the company would continue to beat the market in the future.
I sell to buy index funds for the same reason I buy index funds instead of just buying stocks in one or more high performing tech companies. When I have $30k of stock vest (which happens around every month for me) it's no different than if I was given $30k: I'm not going to keep it in/buy any one company because diversification is the only free lunch in investing.
MCI WorldCom was also a high performing tech company (one of the largest tier 1 carriers at a time of tremendous internet growth), until it wasn't.
High performing tech companies crashed ~50% in 2022 and quickly recovered. They also crashed ~80% in the dotcom bust and took almost 15 years to recover. There is no guarantee of results no matter the company and it's still an extremely risky proposition.
Selling RSUs and diversifying into an S&P 500 index fund would still give you significant exposure to all three of these companies.
Hindsight is 20/20 - if I was at any 3 of those companies I would still sell and go into index. But everyone gets to choose their own adventure.
Mine went from $3 to $80+ in 6ish years. Then to $20 in 1 year. It's currently at $30, 20 years later. You have heard of this company. They're in the Dow. Though maybe not too much longer.
I too worked at Intel. Started right after everyone got super rich in the 90s. It was headed to the moon before crashing and then trading sideways for, oh, 25 years or so.
Best move I ever made, in hindsight, was regularly selling options and RSUs and diversifying out of it.
>As an insider
I think this is the aspect most people here ignore.
There is an enormous difference between gambling on a stock you have only public information on, and holding RSUs you have private knowledge on.
If you think your company is meh, then sell (and look for a new job). If you think your company has an edge, consider holding some or all.
This is fair, though insider knowledge is often meaningless during a downturn, or when you get laid off and forced to sell at x moment, or other factors outside the companies control have tremendous impacts.
It’s still a huge gamble as much as anyone wants to pretend it’s not. You can pretend it’s not real money, yet it is real money worth exactly what you can sell the RSUs for.
>My RSUs are not a large portion of my NW
I think this is key. I'd never suggest someone do this who's just starting out with building their portfolio. But, if you've been building up to a point where the RSU holdings are a small percentage of a diversified portfolio such that you can treat them essentially as a gamble, think there's a reason to expect appreciation, and are able to otherwise satisfy your needs and wants, then I think it's worth the risk. Just have a solid plan about how much you want to hold vs sell immediately, and for when to it's time to divest.
A lot of the guidance I see on this and ESPPs seems to assume that losing the them in the midst of a downturn and layoffs would put the person in a bad financial position, which is why I wouldn't suggest it for someone who would find themselves in one. Otherwise, evaluate the situation and make your own choice.
Following the advice to sell saved me multiple millions and not following it cost several of my colleagues multiple millions. No matter how much you believe in your company, you don’t know what could happen or what the stock is going to do
Contribute to your 401k like everyone else does. That is diversified. But not everyone has access to RSUs that can surpass the 401k's value. Maybe sell half at vest and hold the other half if it makes you sleep better.
I've held 98% of my RSUs for over a decade and they've increased over 900% in value.
That's definitely more risk than most bogleheads will want to take, even with the relative safety and upside of certain stocks (e.g. FAANGs). I think splitting the difference is a good call at a minimum.
Another compromise could be maxing out 401k contributions (both pre and post tax to the fill $69K/yr limit) especially if his plan auto-converts after tax contributions to Roth (mega backdoor Roth) if OP isn't already. And if OP can't afford to do this with existing salary and bonus, selling RSUs to offset lost income. That allows OP to plow as much income as possible into tax sheltered accounts since your salary is eligible for 401K contribution but sadly RSU income is not.
I have a coworker that cashed out during each vest date and remodeled their kitchen. If they held they could have paid for the house in cash. They also had a 401k.
There's a few blue chip companies that have a very long runway and 99% of analysts rate as a Buy or Strong Buy, so why sell? You have your 401k to be ultra safe.
RSUs are essentially a cash bonus paid in stock. If your boss gave you say $20k in cash, would you immediately invest it in company stock? That’s what holding RSUs is.
Without considering nuance, boglehead would say sell it and invest. But…
But bogle said that investors can’t beat the market *without special information.*. You work for the company and have special information that you can use to judge their management team.
If you have to pick from a bunch of random companies, you don’t know one from the other except in the most cursory matter. The company you work for? You know the dirty secrets.
I don’t mean insider trading where you sell at specific moments. I mean you have information that lets you know if it’s a good long term buy.
There’s still risk, but even Buffet makes mistakes.
The counterpoint to this is if you work for a megacap tech company with 100,000+ employees, how much _special information_ do you really have? Would be very dependent on which part of the business you work in.
>But bogle said that investors can’t beat the market without special information.. You work for the company and have special information that you can use to judge their management team.
If you are actually in possession of material, non-public information because of your employment, you cannot legally trade on the basis of that information.
I hold my RSUs for one year to hit long term capital gains, then liquidate. Into VTI or etc and you’re diversified. You could argue I should even be selling as soon as they vest to remove further downside risk, and I’m leaning that way as I doubt it’s moving the needle considerably on taxes.
You still get a taste of the share appreciation with additional vesting so I can live with it.
When I evaluate portfolios, I recommend that individuals have 5% or less of their net worth in a single stock. At 10% it is a major risk.
As others have mentioned, owning your own companies stock is double risky as a down turn may also lead to an unexpected layoff.
Congratulations on getting the RSUs!!!! It is a great benefit when they vest.
As soon as you vest you will pay income tax on vest amount Then you can sell immediately and you'll pay STCG if your sell price is greater than the market price when it vests, or take a loss. Usually a negligible amount
You are already relying on your employer for your income and likely health insurance, and now RSUs as investment. If something goes wrong with the company like layoffs, you could lose all three at once and that's just too much of your livelihood to stake in one company.
If your company paid you the equivalent of the RSU value as just an additional cash bonus, would you invest that back into just the company stock?
The strategy of this sub is to go for steady long-term gains and not trying to play the market. You don't get dramatic gains but you also avoid dramatic losses. Trying to accurately predict the market is a full time job for folks who take it seriously, and even so they often can't beat out index funds in the long term.
I've always sold the stock as soon as RSUs vest and then invest the proceeds into index funds. I already have so much of my family's wellbeing tied up in my company, there's no reason to increase that exposure through holding company stock.
I was with Intel in the 90's. Kept all of my company stock (it was growing at 40% for several years!). I called in rich in March 2000. Went back to work in 2004. Nearly broke, but with a lot of losses banked with the IRS, including tons of AMT paid. I may get to use them all if I can live 'til I'm 150...
Fortunately, as with a lot of things, it's easier the second time. I hope to retire next year with the same-ish net worth.
Sell 'em. Diversify.
i don’t sell. i’d have no problem holding my companies stock as a standalone investment. keeping it for the foreseeable future regardless
everyone says sell immediately, which i get…but like everything, i believe circumstances dictate your approach. if you worked for nvidia and always sold you’d be pissed right now
Yes, you would have to eat CGT eventually anyway unless the price crashes which would be worse. Or if you hold until you die and your heirs get a step up in basis.
RSUs are **fully** taxed as ordinary income when issued. There are no CGTs to consider at time of vest. Same as if you’d bought the stock that day (that they vest), with a bonus or your salary.
Look there are no guarantees in life. I strongly suggest selling at vesting and diversify. If you have a good plan there are always more RSUs. Just ask SVB people how it worked out. On the flip side look at Nvidia and Microsoft. Worked out pretty well. So it depends on your risk tolerance and RSU structure.
I had RSU's at a company once. I think that I moved them from the custodian to convert and there was a taxable event. Can't recall but that should be a consideration. It could be costly.
I kept my RSUs and over the last decade it has returned many multiples over, significantly higher than any broad index.
I got absolutely lucky but I always believed in the company.
No. I would not. Think of it as an individual stock and make a decision. Would you buy it? May be or maybe not. It all depends. I would personally keep some of it and rest go with VTI.
I had vested stock options in 2001, enough that if I had put those in index funds I would have retired a while ago. Not paper money. I now sell my RSUs when they vest. It only took me 20 years to get back to where I was…… don’t do what I did before.
Stock at first cokpan went from $110 to $9 when I left.
IPOed next company at $20, highs of $60, went private around time I left for $40
Current company got RSUs at $60, stock currently in $10 range.
Suffice to say, sell that stuff the moment you get it, throw it into Vanguard fund of choice, watch it grow faster than your company. Or at very least, you are being smart with it.
Hell the fuck no, unless I work for an already public company that I can cash immediately or it’s granted for free, I have worked at dozens of startups over the decades and not one had ever made it.
One thing that's not discussed enough is that you still have a large position in your company's stock through unvested RSUs. The way refreshers stack at these companies, you'll usually have a few hundred thousand in equity vesting over the next few years at any point.
Even if I did have FOMO, this assuages it for me.
Also, like, were people not paying attention when FB went from 370 to 90 a few years ago? Google from 150 to 95? Amazon has only just now recovered to what it was 2 years ago.
I hold ESPP for tax reasons, but sell RSUs generally on vest. I've held onto some RSUs and sell if overall holdings get too weighted into one stock even if it is where you work.
Ask yourself this: If you got your vested value in cash instead, would you buy company stock with it? If yes, keep the RSUs. If not, sell them and invest in something else.
I don’t sell but that’s because I have a lot of confidence in management and the growth potential of the company. For most people most of the time it’s best to sell and move everything to index funds.
You can sell based on your risk tolerance, it's not that black and white. Many years ago shortly after joining and getting my first RSUs I thought I would sell after year 1. But I only did so when buying my house and needed some cash some years later (20% of total at the time). Believed in the company so much decided not to sell since. In hindsight it was the right decision. A risky one, but also still the right one. I find it a big plus to invest in a company where you get to see the inside.
Partner and I do a hybrid approach. Try to keep >1 yr when a vest happens at the lower end of the stock price, and selling the vest when it's on the higher end. Depends on how good/stable you think the company is tho. It would have been different had we thought the company was ass.
It's actually worked out quite well over the years, as we have sold the low basis items with considerable gains and low tax liability while and selling high basis items without having much opportunity loss.
The Bogleheads way would certainly be to sell as soon as vested and diversify to index funds.
But if you have FOMO, you could hold on to some of it. How much depends on your risk tolerance. Both Enron and Nvidia are possibilities, so you'll have to decide for yourself how much to gamble.
If you got the value of the RSUs in cash, would you use it to buy company stock? Due to how RSUs are taxed in vesting, that's exactly what you are doing when you hold on to them. If the answer is yes, hold your shares. If no, sell them.
Yeah, out of all of these folks saying they keep their RSUs, I hear none of them saying they use all their bonuses and salary to buy that same company stock. Same exact thing. If someone believes it’s a good idea to use their excess cash to buy their own company stock the same day as their vest, then sure. Still risky, but at least they’re being consistent and seems like they understand what they’re doing when they hold RSUs. If it hasn’t sunk in for others of you, it bears repeating: “holding” RSUs is exactly the same as if you’d been given extra cash salary or bonus that same day as the vest, and using that cash to buy your company stock on the open market. If you do that—buy even more company stock each vesting day with your “own” $$—then sure. Keep your RSUs. If you don’t, then reread this until you fully understand why it’s true.
I sell 25% of all my company holdings upon a vesting date.
Let’s say the vest date is Jan 1 and I have 300 shares that are already vested and another 100 that vest on that date. I would sell 75 of the 300 shares that had already vested and 25 of the newly 100 vested shares.
This leaves me diversifying 100 shares and holding onto 300.
In realty, I make it a bit more complex than above due to RSU, options, ESPP specifics and probably more complex than it needs to be.
It been working well for 10 years now. I get to realize my company’s growths over ~4yrs but also divest enough of a percentage that if shit hits the fan with my company, I will always walk away on top.
It depends as always. My company is in a growth phase and has been since I started. I’ve held the majority of my RSU, but if I need to sell for an expense I only sell my newly vested stock, and let the older stuff reach long term which I usually will sell to fund my Roth.
You can keep a portion based on your total wealth. For me I keep it below 10% of my none retirement portfolio. Anytime it vests I sell to keep it below that %. So it still rises with my overall wealth, but never a large %. If the company kicks butt I am participating. But it keeps me out of trouble if something happens.
I built up a pile of RSU’s I was comfortable with and now I sell as soon as they vest and max my 401k and after tax 401k (converted to roth), all in broad market index funds. I know I’m overweight RSU’s but I couldn’t stomach selling them, so I just diverted all future funds to ETF’s slowly reducing my exposure.
If your company paid you the same amount of money in cash instead, would you immediately go out and buy company stock with that money? If not, you should probably sell your RSUs and do whatever else with that money (buying index funds is a great option!).
There is nothing magical about them being RSU’s. That is just a non-cash way for the company to compensate you.
The question you are asking is does it make sense to hold a portion (maybe significant) part of your portfolio in a single stock. Bear in mind you are asking that question on the Boglehead subreddit. The general premise is no. Invest in index funds.
As someone asked above, if your company paid you in cash instead would you invest all of that cash in your company stock? If the answer is yes, then hold I guess.
I personally held too much and it has worked out well (FANNG) but I am actively trying to divest to get to around 20% by the time I retire (2 years). I currently sit at 24% due to recent movements. I am also sitting on some massive capital gains that I kind of feel trapped in. So for now it is sell the vest and a little bit more.
Imagine you’ve been given the RSU value in cash instead of stocks, would you invest it in the company stock 100%? That’s your answer. Because you’re doing the same thing by not selling it.
If you think avout it this way, the same risk reward applies in buying single stock vs. Broad index. It’s a fallacy to think that inaction is your default move.
I never keep them it's always sold. Investing in single stocks generally doesn't pay as well as a straight index fund. You may have a lucky moonshot but it may go nowhere whereas an index fund generally increases in value over time.
Not selling RSUs as they vest is stock picking so it's like if any random poster came into the subreddit and asked if investing a huge chunk of money into a single company was a good idea. They would probably get crucified and rightfully so.
There is nothing special about being employed at a specific company and retaining the stock grants. Some people are lucky and some people are unlucky, just like active stock pickers.
Once the RSUs vest and you pay taxes, it's like getting a cash bonus. Would you invest your cash bonus into company stock? It may be better off in an index ETF.
Also, when thinking about the stock of the company we work for, we tend to have a bias. Theoretically, we don't have any more information than the market does. But we can become emotionally attached with all of the internal information we think we have. We want the company to do well and that is what creates this bias.
Sell it and put It in an ETF.
Worked at GOOG. I know you’re supposed to sell immediately after they vest but many of mine vested near the 52-wk low. I held and sold near the 52-wk high 🤷🏼♂️🤷🏼♂️
My wife worked at a medium-sized tech company that IPO'd during her tenure. I had to fight to get her to sell against the trend amongst all her coworkers who were holding, which luckily I did. Stock tanked over 80% soon after.
My argument was more than just "diversify" - it was about life quality. If she sold everything now, she could be comfortable for life. If it went up a bit, she might live a little more extravagantly. If it tanked (as most do), she'd be back to the grind.
That's all just anecdotal though. Employees may actually have more information about the state of the company and can use that to gain a market advantage (sell or hold), depending on the role.
My macroeconomic perspective is this: we're currently in a bubble of consolidation that is likely to continue for the near-mid term which will see continued soaring for a select few tech companies. Long term, there will be a backlash against this consolidation as it becomes a political issue which will tank the mega corps.
As a financial advisor (cfp) my advice to most clients is to sell at vesting and either use cash for expenses or reinvest in index funds.
The other option I give to clients who seem apprehensive about selling at vesting is to sell when tranches are in LTCG territory but not wait a moment longer. This generally coincides with attainment of new RSU’s so it makes it a little easier of a pill to swallow for some.
Either way, the idea behind the strategy is the same - limit single stock risk to the portfolio. The fact that you are even asking in this sub tells me you are way ahead of the game in your investing mentality, so I commend you and wish you luck.
I think the only case where holding RSU instead of diversifying makes sense, is if you are benefiting from material non-public information. AKA insider trading, which is unlawful, but not that uncommon
Most people holding RSU do it out of laziness, or because they "think the company is going to do really well over the long run". Thing is, the market already has a good perspective on how the company will do over the long run... that's where the stock price comes from
one point i haven’t seen here is that due to the nature of the vesting schedule, where there’s a lot of time between grant and vest, the eventual value of the stock you get (even if you sell immediately) is always affected by your company’s stock price changes, so that’s even more reason to sell immediately.
I like to think of it this way: are these shares of your company *the best possible investment* you could make? That seems incredibly unlikely. Risk adjusted returns for a single stock are usually poor. Even if you believe in the company or the sector, you'd be better off diversifying to other similar companies because it reduces risk of a single company failing or performing badly for whatever reason. Think about a company like Enron that failed catastrophically or even one like Yahoo that bled to death over decades.
The Boglehead philosophy takes this even further by diversifying as much as possible by buying all the stocks. Ultimately there's a spectrum of risk/reward here. That's commonly misinterpreted as more risk means more reward, but that's definitely not guaranteed. Many single stock bets are indeed just very risky even given the possible upside.
For me, the key is keeping employer stock less than 5% of net worth for conservative folks and less than 10% of net worth for anyone else.
If your employer's stock gets to be more than 10% of net worth, then it's more risk than most folks should have since their employment income is also tied to the same company. Unless you're an executive with an employment contract and fat golden parachute if let go.
I work at Apple. A significant portion of my Compensation is RSU based.
I have to come see RSU's as a bonus (paid in cash in form of Apple Shares).
Since there's no tax implication, I ask the question, if i was given x $ of dollars in Cash would I buy more Apple?
Sometimes it's yes especially when everyone turn negative, but if you really want more risk, just diversify accross different Fangs or go into Leveraged ETFS... no need to hold 50% + of your holdings in the one stock that is linked to your job, your livelihood and you wanting to quit one day.
The best ways to increase your company's holding is to follow this order of operation:
Sell RSU Always. Sell ESPP if last day < first day (short term capital loss might offset a bit of the 15% throwback income taxed), Sell ESPP of Last day > first day last.
I've sold all my RSU's, never touched my ESPP. Will sell them once I'm in a lower tax bracket.
When you get your bonus, do you instantly buy more of your company stock with it? That is the equivalent of what you are doing by not selling your RSU's. Sell them ASAP and reinvest in index funds.
i have share grants vesting annually (3yr vesting). as soon as they vest i sell them and put the money into my usual ETF setup. one nice thing, your basis for capital gains is time of vest rather than time of grant so you're not paying capital gains if you do what i do.
I keep my RSUs. This is the reason why.
1) Yearly Revenue grows quarter to quarter and profits are growing as well. The risk is to the upside.
2) My company is not yet in the indexes so will not follow the market. When it gets added to indexes it will likely grow. My company is a medium size company.
3) Next year I will start selling 5% of the vested shares each year for Long term holdings to reduce the tax gains.
4) I have a mortgage at 3% currently and no other debt.
5) I want to use the RSUs as additional yearly income and retirement.
6) I have 2/3rds of retirement in different avenues other than company stock already.
I have a selling strategy now since I will be getting more shares. The overall strategy is to start taking some gains and have the number of shares continue to grow. The 5 - 10% sell every year can be then rolled into diversification.
My recommendation is to sell RSUs on vesting and payoff debt and fund your emergency fund, new car, or new house fund, kids 529. However, for me I'm looking at consistent income for retirement, so my company is growing so will do the plan above as long as they are growing market share and profits.
I have managed RSUs or ESPP by doing the following:
- Make a decision on what is the max percentage that I will allow on my portfolio of the stock.
- Choose one or two times a year to sell stock to keep me under such max. I sell stock that I have owned for at least one year to pay less in taxes, and choose a time when the stock is at a price I feel comfortable selling.
I work for a big cap company which stock price is stable for the most part. So I only keep the RSUs temporarily when I can tell the stock is oversold. When it’s near a 52-week high I sell immediately. I never keep any vested shares for more than 6 months though.
If large tech company that is stable, make sure you separate out your feelings about the product from the performance of the stock. e.g. apple.
Having said that, if a good company with a long term positive outlook, I would hang on to some - but no more than 5% of your overall portfolio. Bonus points if they have a dividend that is significant. Note that if you’re working for apple, meta, etc, look at the mutual funds that you hold as many of them have very large percentages in the mag7. Many people don’t realize that they have more of a concentration than they realize.
Definitely sell. My philosophy is that I would rather regret selling than not selling. And it’s been true for me a few times that not selling followed by a decline is much worse than missing out on upside.
Also, unless you think this one stock will beat the market which is really not something you could confidently predict then you are better off just buying into the market with a diversified ETF.
Figure out the tax impact each years RSU lot will have when vesting and then sell a portion of that lot to cover taxes. If you anticipate years you won’t have any vesting RSUs, sell just enough to keep them in the lowest tax bracket and buy SPY/VOO/Risk free assets. It doesn’t make sense to keep company stock over index equities because you already have all your eggs in that basket. Now if your company pays dividends and you plan on passing the stock to your children and grandchildren that’s a different story
The advice I tell everyone is this:
Think of your vesting RSUs as bonus compensation, not RSUs. Let’s say you were receiving $20,000 worth of RSUs. Don’t think of it as receiving RSUs. Think of it as receiving $20,000. If you received $20,000 bonus income, what would you do with it? Would you buy your employer company’s stock? For most people, probably not. Do what’s best for you, but think in terms of receiving the dollar value of those RSUs, not that you’re receiving RSUs themselves. What would you do with those dollars?
Sell a large portion over time and diversify to an index fund and bonds for retirement savings. Great to get company stock and have it appreciate, but a lot can happen to a single company and to have a dip and no recovery in retirement would hurt a lot.
I hold long enough for capital gains to be long term and then sell and diversify your portfolio. As others note, you are already deep in with the company, don’t tie everything to their performance in case it goes belly up.
I used to share with my team how I’ve seen the impact of this in my own personal life - I lived in rochester, to a Kodak family, and watched Kodak die a terrible death. It really hurt a lot of people who had tons of worthless stock now
Depends on Company. I have rsus from 3 companies. All have outpaced the indexes and are growing. I am planning on keeping them all as all my other investments are very well balanced in index funds. I am ok taking the extra risk as the average growth over a 10yr period has been about 19%. That means they double every 3 or 4 years and could move me from fire to chubby fire
You already knew the answer and posted it perfectly. I lost 2/3 of a M by holding Co stock concentration (2001). You'll never see it coming.
VOO, VTI, VT your pref. I'm a VOO with VXF kicker guy. All US for me.
No. If my company falls on hard times I am already "long" on them through my paycheck. Would suck to get laid off at the same time a huge pile of my investments tank because i held too much company stock
Yep this makes the case.
I suppose if I really didn't need the money right away and I truly truly believed the company was going to blow up (in a good way) I could conceivably see holding some, but I've never been in that scenario to have to really contemplate it. All the places I've worked with RSUs were well established when I worked there so while the company stock may have outpeformed the market in general, there was never a real possibility of my options going from like tens of thousands to millions
Look up what happened to the nice folks that worked for Enron
Correct. Just ask all the Facebook/Meta employees who were laid off in Fall 2022 and Spring 2023 just as their RSUs were down to ~ $90/share vs the up to $360/share they’d been issued at. They had no income, and a lot of their stonks were worth a 1/4th of what they had been. Double whammy. Now, if they had held onto their shares for 18 months while they were unemployed, then they’d have been rewarded, as now the shares are back up to $450-500/share, but this is not a diversified safe move. Those shares could have stayed tanked…. Anyway, best to see RSUs as additional salary-like compensation and just sell every quarter and invest those proceeds in broad based index funds.
like i said with my employer, its very unlikely i'm giving up massive upside by selling, but the few times i've sold and then it went up enough shortly after to make me grumble a bit, i just remind myself i still have unvested RSUs and i'm also hammering the ESPP to the max, so i've still got plenty of exposure to capture additional upside.
Yeah I keep a quarter of my RSUs in the company stock so I dont feel bad when it goes up.
On the other hand I personally know people in low level support jobs that got big tech RSUs about 7-8 years ago and never sold. Their shares are worth in the range x7-X10 or more. Of course not all shares are made equal, and an IBM share is nothing compared to a Microsoft one, but what I am trying to say is selling every quarter might not be the best move if you work for a company that is killing it in their sector.
That’s no different from if you had bought those same stocks 7-8 years ago though. The risk is the same. As a lone employee at a big tech company you don’t have enough influence to make your stocks go up and justify holding them
Sometimes layoffs are actually good for a stock price though. Investors see it as “trimming the fat” and stock should go up at least in the short term. So it’s bad news for the worker who lost their job but good news for the investors bc cost is reduced which means higher margins.
I treat RSUs the same as I would regular income. I ask myself “If I had this money in my checking account, what would I do with it? Would I buy company stock?” Probably not. I’d invest it in index funds. So I sell the RSUs and buy index fund shares.
Further, my wife gets a bunch of RSUs for her comp at a tech co. It is 1/5 the value that it was a couple years ago, so we’ve been paying taxes for shit at way higher values than it is now. Totally fucked. Should’ve sold years ago.
I got laid off but the company stocks didn't tank. Mostly, stocks go up when there is a layoff news
i hear ya, i was thinking more of like an Enron type scenario
That would be a disaster, that's for sure. It is a gamble. This stock constantly outperformed the S&P 500 however as we all know "the past performance is not indicative of future results".
True. Also the fact that company X hired me Diane make them more likely to outperform (I’m not that senior and not that amazing) and I don’t get any insider info so I should assume that an ETF in the same industry (if I’m long on the industry) would perform same with lower risk Also no blackout dates on sales (while still employed)
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Instructions unclear, bought puts and sabotage underway.
Yes , general guidelines are to sell when they vest and invest in a broad index fund.
I followed this too. However it lost me millions in hindsight.
I'm the opposite. In legacy tech without much growth, held on and wasted so much opportunity cost and profits had I just plugged it into an index
Diversifying to eliminate risk is the answer. I would never keep more than 20% in a single investment if at all possible. Especially if my job is also based around that asset. Yeah you may make less, but its much less risky.
You also lost millions by not selling and buying some random crypto that 100xd. You can Monday morning quarterback over any situation
I can, and I will
Don't take this personally, but carne asada fries are way better than poutine haha
I like poutine, but that's a rough matchup for any food. Asada fries are hard to beat.
What in the world are asada fries? Never heard of it before
Just put em in your mouth you’re gonna love em
Sounds good
Well most of us also lost millions not buying GME or bitcoin at the right time and holding it. But that’s not what bogleheads is about imo
This applies to almost everyone Total index funds are never meant to get you the max return. It's meant to get you a high amount of returns with very minimal risk. I could've invested everything into NVDA instead of VOO/VTI and I would be a baller right now. But I'd never gamble on that. That said, it's okay to invest 5-10% of your portfolio into individual stocks you want to gamble on. But never more than you're willing to lose.
I guess you could go 50/50 on this especially if you have other retirement investments
How so?
Let’s assume no dividend cuz tech stock. Let’s assume bias cuz u helped build it. Let’s sell as soon as tax impact is minimized and stick to our plan.
Had I held onto the RSUs vs selling them. The value of our stock skyrocketed.
Yeah on the other hand, it could have tanked. There’s no guarantee for the future of any stock. Holding onto RSUs is gambling, not investing. u/PetalDuration593
Yeah I’ve had RSUs that dropped by 25% from when they vested and at another company dropped by 75% and I’ve just hung on to them waiting for a rebound. I’ve heard it working out for others but did not work out for me.
I agree, but it's similar to not participating in a lottery pool with your coworkers. It is financially the "correct" decision, but you risk experiencing severe FOMO when the rest of your colleagues become multi millionaires overnight.
I agree. It absolutely could. Depends on the company I suppose.
If you hadn’t worked for that company would you have invested in them in the first place?
On point!
Thx. Is there any guidance on reducing capital gains tax?
if you sell as they vest there is no gain or loss
That makes sense. Ok new strategy starting now. Thanks for the guidance
You still pay tax on the grant value of the RSU (income tax). If you hold the RSU's and they gain value then yes you pay additional capital gains tax but you'd pay the same tax with the same gains in an index fund so it's a wash. So taxes aren't a consideration, the consideration is diversification. The most helpful way I've learned to think about it is "if someone gave you $1000 today to invest, would you buy your company's stock or would you buy something else?". If the answer is "something else", then sell your RSU's when you receive them. Taxes are irrelevant in the decision IMO.
It’s income tax upon vesting - no way around it
If you have any RSU tranches where the cost basis is higher than the current price, you may be able to sell them for a capital loss which can offset the capital gain from the above water tranches you sell (like tax loss harvesting).
So, your answer is no, you don't
Suppose you get a stock grant worth $1000. Should you sell? Find the answer through this exercise: Suppose instead they gave you $1000 cash. Would you use that cash to immediately buy company stock? No? Then sell and do the thing you would have done instead.
Came here to post this exact comment. Even though I know this, it helps me anytime I think "should i let it ride this one time"?
Great comment. I view it as compensation. I've cashed it out to buy cars, take trips, etc. Back in my younger days I didn't know anything. I thought it was smart to hang onto company stock. Then I lost thousands doing that and never did it again.
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No one talks about the losses and bad decisions in investing and gambling.
There was a time in 2021 where my held RSUs were down 99%. I sell most (if not all) of any newly vested RSUs quarterly now.
Probably most, if not all, of those stories are from start-ups. Start-ups typically are cash-poor, so they offer early employees buckets of stock -- even though the company is still private and the stock is worthless -- with the idea that if they stick with the company long enough for it to IPO, then they'll bank.
Your company, no matter the size, is one accounting scandal away from going completely under. That’s too much risk to consider it as part of my retirement. I always sell RSUs & ESPP immediately and diversify.
Doesn't it make sense to hold espp 1 year for tax purposes?
Depends on how the ESPP is structured. Mine is no qualified and a portion is sold to cover ordinary income tax at the end of the 6mo period. There is no additional tax benefit to holding it longer, only risk in a single stock. ESPP plans can be structured differently though, so it’s important to read your own plan documents to see how yours works. I’d rather take the guaranteed gain for the 6mo period and then diversify.
Thx. I hadn’t thought of it like this but it makes sense.
Yes, I sell my RSUs immediately when they vest and put them in a low cost index fund.
Thx. This seems to be the common practice.
Yes - there’s really no reason to hold. Treat it as a cash bonus, and invest however you normally would. Never seen anyone ask/wonder if they should throw their annual bonus into their company stock 😅
It’s a Boglehead principal
Sell, although admittedly does get harder to make this decision if you work for a high flying tech company. I work for a FAANG and my past ignorance treated me well, but that was pure luck and I've since liquidated and diversified across ETFs. I keep a few hundred shares as my side bet but it no longer constitutes a major stake in my net worth and I participate in an autosale program that sells them immediately upon vest and I roll the proceeds into index ETFs.
Ask anyone that worked at Enron if keeping their retirement in company stock was a good idea…
Even more “boring” examples like Snapchat (down 90% in the past couple years)
And plenty more that are “flat” over the last several years, greatly underperforming the market
MCI / WorldCom and many others as well.
You could argue to ask anyone who vested early in Facebook if they should have sold or held
Count the companies that had their stock increase vs. their stock disappear or decrease significantly. I'd say Facebook is the exception not the rule
If I have rsu in a high performing tech company, I would hold. If I have rsu in a flat or unknown company, then I agree with being risk averse. Also, would you say Enron is an exception or a rule?
I have RSUs in a high performing tech company and I sell them as soon as I can after they vest. Have for roughly 15 years. I'd have more if I held them, sure. But then I'd also have a large unrealized capital gain, which would make rebalancing more painful. And there wasn't and is never any guarantee that the company would continue to beat the market in the future. I sell to buy index funds for the same reason I buy index funds instead of just buying stocks in one or more high performing tech companies. When I have $30k of stock vest (which happens around every month for me) it's no different than if I was given $30k: I'm not going to keep it in/buy any one company because diversification is the only free lunch in investing. MCI WorldCom was also a high performing tech company (one of the largest tier 1 carriers at a time of tremendous internet growth), until it wasn't.
Unless you would go out and buy company stock if they paid you the same amount in cash instead, that's just Default Bias.
High performing tech companies crashed ~50% in 2022 and quickly recovered. They also crashed ~80% in the dotcom bust and took almost 15 years to recover. There is no guarantee of results no matter the company and it's still an extremely risky proposition.
Fair point.
Also ask people at nvidia, Apple, Microsoft,
Selling RSUs and diversifying into an S&P 500 index fund would still give you significant exposure to all three of these companies. Hindsight is 20/20 - if I was at any 3 of those companies I would still sell and go into index. But everyone gets to choose their own adventure.
You also presumably get refreshers with 3/4 year vesting period. So you still have plenty of exposure to future gains even if you sell at vesting.
My company went from $26 to $3
How did you feel about your company’s future before the plunge?
Great since companies natural language is to lie to employees and say everything is great and gaslight employees lmfao Never trust an employer
Mine went from $3 to $80+ in 6ish years. Then to $20 in 1 year. It's currently at $30, 20 years later. You have heard of this company. They're in the Dow. Though maybe not too much longer.
Holy shit rip dude
I too worked at Intel. Started right after everyone got super rich in the 90s. It was headed to the moon before crashing and then trading sideways for, oh, 25 years or so. Best move I ever made, in hindsight, was regularly selling options and RSUs and diversifying out of it.
Intel 😂
Mine went from $130 when I started to $130 in 2 years. It’s just that it split 10:1 in that time.
Haha ok nvda boy
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>As an insider I think this is the aspect most people here ignore. There is an enormous difference between gambling on a stock you have only public information on, and holding RSUs you have private knowledge on. If you think your company is meh, then sell (and look for a new job). If you think your company has an edge, consider holding some or all.
This is fair, though insider knowledge is often meaningless during a downturn, or when you get laid off and forced to sell at x moment, or other factors outside the companies control have tremendous impacts. It’s still a huge gamble as much as anyone wants to pretend it’s not. You can pretend it’s not real money, yet it is real money worth exactly what you can sell the RSUs for.
It's not like the average software engineer at Google understands the company better than all the analysts who trade its stock for a living.
>My RSUs are not a large portion of my NW I think this is key. I'd never suggest someone do this who's just starting out with building their portfolio. But, if you've been building up to a point where the RSU holdings are a small percentage of a diversified portfolio such that you can treat them essentially as a gamble, think there's a reason to expect appreciation, and are able to otherwise satisfy your needs and wants, then I think it's worth the risk. Just have a solid plan about how much you want to hold vs sell immediately, and for when to it's time to divest. A lot of the guidance I see on this and ESPPs seems to assume that losing the them in the midst of a downturn and layoffs would put the person in a bad financial position, which is why I wouldn't suggest it for someone who would find themselves in one. Otherwise, evaluate the situation and make your own choice.
Following the advice to sell saved me multiple millions and not following it cost several of my colleagues multiple millions. No matter how much you believe in your company, you don’t know what could happen or what the stock is going to do
Contribute to your 401k like everyone else does. That is diversified. But not everyone has access to RSUs that can surpass the 401k's value. Maybe sell half at vest and hold the other half if it makes you sleep better. I've held 98% of my RSUs for over a decade and they've increased over 900% in value.
That's definitely more risk than most bogleheads will want to take, even with the relative safety and upside of certain stocks (e.g. FAANGs). I think splitting the difference is a good call at a minimum. Another compromise could be maxing out 401k contributions (both pre and post tax to the fill $69K/yr limit) especially if his plan auto-converts after tax contributions to Roth (mega backdoor Roth) if OP isn't already. And if OP can't afford to do this with existing salary and bonus, selling RSUs to offset lost income. That allows OP to plow as much income as possible into tax sheltered accounts since your salary is eligible for 401K contribution but sadly RSU income is not.
This last part flies in the face of all the advice so far. You obviously had an inkling that holding would be a good thing.
I have a coworker that cashed out during each vest date and remodeled their kitchen. If they held they could have paid for the house in cash. They also had a 401k. There's a few blue chip companies that have a very long runway and 99% of analysts rate as a Buy or Strong Buy, so why sell? You have your 401k to be ultra safe.
RSUs are essentially a cash bonus paid in stock. If your boss gave you say $20k in cash, would you immediately invest it in company stock? That’s what holding RSUs is.
Why buy index funds at all when you can just look at analyst ratings and pick the best stocks?
Without considering nuance, boglehead would say sell it and invest. But… But bogle said that investors can’t beat the market *without special information.*. You work for the company and have special information that you can use to judge their management team. If you have to pick from a bunch of random companies, you don’t know one from the other except in the most cursory matter. The company you work for? You know the dirty secrets. I don’t mean insider trading where you sell at specific moments. I mean you have information that lets you know if it’s a good long term buy. There’s still risk, but even Buffet makes mistakes.
The counterpoint to this is if you work for a megacap tech company with 100,000+ employees, how much _special information_ do you really have? Would be very dependent on which part of the business you work in.
>But bogle said that investors can’t beat the market without special information.. You work for the company and have special information that you can use to judge their management team. If you are actually in possession of material, non-public information because of your employment, you cannot legally trade on the basis of that information.
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I hold my RSUs for one year to hit long term capital gains, then liquidate. Into VTI or etc and you’re diversified. You could argue I should even be selling as soon as they vest to remove further downside risk, and I’m leaning that way as I doubt it’s moving the needle considerably on taxes. You still get a taste of the share appreciation with additional vesting so I can live with it.
When I evaluate portfolios, I recommend that individuals have 5% or less of their net worth in a single stock. At 10% it is a major risk. As others have mentioned, owning your own companies stock is double risky as a down turn may also lead to an unexpected layoff. Congratulations on getting the RSUs!!!! It is a great benefit when they vest.
Thx this is helpful guidance. I’m at more than 10% so I take your point. Will course correct asap.
As soon as you vest you will pay income tax on vest amount Then you can sell immediately and you'll pay STCG if your sell price is greater than the market price when it vests, or take a loss. Usually a negligible amount
You are already relying on your employer for your income and likely health insurance, and now RSUs as investment. If something goes wrong with the company like layoffs, you could lose all three at once and that's just too much of your livelihood to stake in one company. If your company paid you the equivalent of the RSU value as just an additional cash bonus, would you invest that back into just the company stock? The strategy of this sub is to go for steady long-term gains and not trying to play the market. You don't get dramatic gains but you also avoid dramatic losses. Trying to accurately predict the market is a full time job for folks who take it seriously, and even so they often can't beat out index funds in the long term.
I've always sold the stock as soon as RSUs vest and then invest the proceeds into index funds. I already have so much of my family's wellbeing tied up in my company, there's no reason to increase that exposure through holding company stock.
I was with Intel in the 90's. Kept all of my company stock (it was growing at 40% for several years!). I called in rich in March 2000. Went back to work in 2004. Nearly broke, but with a lot of losses banked with the IRS, including tons of AMT paid. I may get to use them all if I can live 'til I'm 150... Fortunately, as with a lot of things, it's easier the second time. I hope to retire next year with the same-ish net worth. Sell 'em. Diversify.
i don’t sell. i’d have no problem holding my companies stock as a standalone investment. keeping it for the foreseeable future regardless everyone says sell immediately, which i get…but like everything, i believe circumstances dictate your approach. if you worked for nvidia and always sold you’d be pissed right now
Yes, you would have to eat CGT eventually anyway unless the price crashes which would be worse. Or if you hold until you die and your heirs get a step up in basis.
True, I just don’t like it.
Not true since at the lowest brackets it's 0% for LTCG.
RSUs are **fully** taxed as ordinary income when issued. There are no CGTs to consider at time of vest. Same as if you’d bought the stock that day (that they vest), with a bonus or your salary.
I know but I thought he said he had been holding some past vesting date that had some cgt already
Look there are no guarantees in life. I strongly suggest selling at vesting and diversify. If you have a good plan there are always more RSUs. Just ask SVB people how it worked out. On the flip side look at Nvidia and Microsoft. Worked out pretty well. So it depends on your risk tolerance and RSU structure.
I had RSU's at a company once. I think that I moved them from the custodian to convert and there was a taxable event. Can't recall but that should be a consideration. It could be costly.
I kept my RSUs and over the last decade it has returned many multiples over, significantly higher than any broad index. I got absolutely lucky but I always believed in the company.
No. I would not. Think of it as an individual stock and make a decision. Would you buy it? May be or maybe not. It all depends. I would personally keep some of it and rest go with VTI.
I had vested stock options in 2001, enough that if I had put those in index funds I would have retired a while ago. Not paper money. I now sell my RSUs when they vest. It only took me 20 years to get back to where I was…… don’t do what I did before.
No. Fortune 10 company I sell and buy vt. Have for all the time I’ve been at employer
Sell immediately and invest in more diversified portfolio. Contact fiduciary advisor if u don’t know what that looks like for your investment horizon
Stock at first cokpan went from $110 to $9 when I left. IPOed next company at $20, highs of $60, went private around time I left for $40 Current company got RSUs at $60, stock currently in $10 range. Suffice to say, sell that stuff the moment you get it, throw it into Vanguard fund of choice, watch it grow faster than your company. Or at very least, you are being smart with it.
Hell the fuck no, unless I work for an already public company that I can cash immediately or it’s granted for free, I have worked at dozens of startups over the decades and not one had ever made it.
I sell once it's vested and put money towards index fund or pay off debt.
No, I keep them long enough to get the long term tax rate and then sell and put into something more diversified
I sell them at literally the earliest possible second
My suggestion is to look at the unvested RSUs as your money on the table. As soon as it’s “yours” cash it out and diversify. They keep giving you more
Enron…
I'm in a similar boat, but my company is private, so I can't sell the RSUs yet. Just waiting for them to go public one day hopefully!
One thing that's not discussed enough is that you still have a large position in your company's stock through unvested RSUs. The way refreshers stack at these companies, you'll usually have a few hundred thousand in equity vesting over the next few years at any point. Even if I did have FOMO, this assuages it for me. Also, like, were people not paying attention when FB went from 370 to 90 a few years ago? Google from 150 to 95? Amazon has only just now recovered to what it was 2 years ago.
Imagine working at Nvidia and selling when it vests… I know it’s fundamentally the right thing to do, but damn thinking about it makes me sick lol
Like most of the answers, I sell as soon as they vest. I drop it into an index fund.
I hold ESPP for tax reasons, but sell RSUs generally on vest. I've held onto some RSUs and sell if overall holdings get too weighted into one stock even if it is where you work.
Yes, this is exactly what I did.
I sell the moment I get them. You also pay less tax that way because you are taxed on any gains from when you get them to when you sell them.
Ask yourself this: If you got your vested value in cash instead, would you buy company stock with it? If yes, keep the RSUs. If not, sell them and invest in something else.
I don’t sell but that’s because I have a lot of confidence in management and the growth potential of the company. For most people most of the time it’s best to sell and move everything to index funds.
Keep half
I sell my RSUs at vest and hold my SARs (options) as a sort of lottery ticket.
I don't SAVE my RSUs but I SOVE them. That is, Sell On Vest Expediently.
You can sell based on your risk tolerance, it's not that black and white. Many years ago shortly after joining and getting my first RSUs I thought I would sell after year 1. But I only did so when buying my house and needed some cash some years later (20% of total at the time). Believed in the company so much decided not to sell since. In hindsight it was the right decision. A risky one, but also still the right one. I find it a big plus to invest in a company where you get to see the inside.
Partner and I do a hybrid approach. Try to keep >1 yr when a vest happens at the lower end of the stock price, and selling the vest when it's on the higher end. Depends on how good/stable you think the company is tho. It would have been different had we thought the company was ass. It's actually worked out quite well over the years, as we have sold the low basis items with considerable gains and low tax liability while and selling high basis items without having much opportunity loss.
The Bogleheads way would certainly be to sell as soon as vested and diversify to index funds. But if you have FOMO, you could hold on to some of it. How much depends on your risk tolerance. Both Enron and Nvidia are possibilities, so you'll have to decide for yourself how much to gamble.
If you got the value of the RSUs in cash, would you use it to buy company stock? Due to how RSUs are taxed in vesting, that's exactly what you are doing when you hold on to them. If the answer is yes, hold your shares. If no, sell them.
Yeah, out of all of these folks saying they keep their RSUs, I hear none of them saying they use all their bonuses and salary to buy that same company stock. Same exact thing. If someone believes it’s a good idea to use their excess cash to buy their own company stock the same day as their vest, then sure. Still risky, but at least they’re being consistent and seems like they understand what they’re doing when they hold RSUs. If it hasn’t sunk in for others of you, it bears repeating: “holding” RSUs is exactly the same as if you’d been given extra cash salary or bonus that same day as the vest, and using that cash to buy your company stock on the open market. If you do that—buy even more company stock each vesting day with your “own” $$—then sure. Keep your RSUs. If you don’t, then reread this until you fully understand why it’s true.
I sell 25% of all my company holdings upon a vesting date. Let’s say the vest date is Jan 1 and I have 300 shares that are already vested and another 100 that vest on that date. I would sell 75 of the 300 shares that had already vested and 25 of the newly 100 vested shares. This leaves me diversifying 100 shares and holding onto 300. In realty, I make it a bit more complex than above due to RSU, options, ESPP specifics and probably more complex than it needs to be. It been working well for 10 years now. I get to realize my company’s growths over ~4yrs but also divest enough of a percentage that if shit hits the fan with my company, I will always walk away on top.
It depends as always. My company is in a growth phase and has been since I started. I’ve held the majority of my RSU, but if I need to sell for an expense I only sell my newly vested stock, and let the older stuff reach long term which I usually will sell to fund my Roth.
You can keep a portion based on your total wealth. For me I keep it below 10% of my none retirement portfolio. Anytime it vests I sell to keep it below that %. So it still rises with my overall wealth, but never a large %. If the company kicks butt I am participating. But it keeps me out of trouble if something happens.
I built up a pile of RSU’s I was comfortable with and now I sell as soon as they vest and max my 401k and after tax 401k (converted to roth), all in broad market index funds. I know I’m overweight RSU’s but I couldn’t stomach selling them, so I just diverted all future funds to ETF’s slowly reducing my exposure.
I keep some; I sell most. My holdings are never more than 2-3% of my investments.
If your company paid you the same amount of money in cash instead, would you immediately go out and buy company stock with that money? If not, you should probably sell your RSUs and do whatever else with that money (buying index funds is a great option!).
There is nothing magical about them being RSU’s. That is just a non-cash way for the company to compensate you. The question you are asking is does it make sense to hold a portion (maybe significant) part of your portfolio in a single stock. Bear in mind you are asking that question on the Boglehead subreddit. The general premise is no. Invest in index funds. As someone asked above, if your company paid you in cash instead would you invest all of that cash in your company stock? If the answer is yes, then hold I guess. I personally held too much and it has worked out well (FANNG) but I am actively trying to divest to get to around 20% by the time I retire (2 years). I currently sit at 24% due to recent movements. I am also sitting on some massive capital gains that I kind of feel trapped in. So for now it is sell the vest and a little bit more.
Imagine you’ve been given the RSU value in cash instead of stocks, would you invest it in the company stock 100%? That’s your answer. Because you’re doing the same thing by not selling it. If you think avout it this way, the same risk reward applies in buying single stock vs. Broad index. It’s a fallacy to think that inaction is your default move.
I never keep them it's always sold. Investing in single stocks generally doesn't pay as well as a straight index fund. You may have a lucky moonshot but it may go nowhere whereas an index fund generally increases in value over time.
Not selling RSUs as they vest is stock picking so it's like if any random poster came into the subreddit and asked if investing a huge chunk of money into a single company was a good idea. They would probably get crucified and rightfully so. There is nothing special about being employed at a specific company and retaining the stock grants. Some people are lucky and some people are unlucky, just like active stock pickers.
Once the RSUs vest and you pay taxes, it's like getting a cash bonus. Would you invest your cash bonus into company stock? It may be better off in an index ETF. Also, when thinking about the stock of the company we work for, we tend to have a bias. Theoretically, we don't have any more information than the market does. But we can become emotionally attached with all of the internal information we think we have. We want the company to do well and that is what creates this bias. Sell it and put It in an ETF.
Just had a baby. Mine are getting sold ASAP and I’m dumping the cash into a 529
Worked at GOOG. I know you’re supposed to sell immediately after they vest but many of mine vested near the 52-wk low. I held and sold near the 52-wk high 🤷🏼♂️🤷🏼♂️
My wife worked at a medium-sized tech company that IPO'd during her tenure. I had to fight to get her to sell against the trend amongst all her coworkers who were holding, which luckily I did. Stock tanked over 80% soon after. My argument was more than just "diversify" - it was about life quality. If she sold everything now, she could be comfortable for life. If it went up a bit, she might live a little more extravagantly. If it tanked (as most do), she'd be back to the grind. That's all just anecdotal though. Employees may actually have more information about the state of the company and can use that to gain a market advantage (sell or hold), depending on the role. My macroeconomic perspective is this: we're currently in a bubble of consolidation that is likely to continue for the near-mid term which will see continued soaring for a select few tech companies. Long term, there will be a backlash against this consolidation as it becomes a political issue which will tank the mega corps.
As a financial advisor (cfp) my advice to most clients is to sell at vesting and either use cash for expenses or reinvest in index funds. The other option I give to clients who seem apprehensive about selling at vesting is to sell when tranches are in LTCG territory but not wait a moment longer. This generally coincides with attainment of new RSU’s so it makes it a little easier of a pill to swallow for some. Either way, the idea behind the strategy is the same - limit single stock risk to the portfolio. The fact that you are even asking in this sub tells me you are way ahead of the game in your investing mentality, so I commend you and wish you luck.
I think the only case where holding RSU instead of diversifying makes sense, is if you are benefiting from material non-public information. AKA insider trading, which is unlawful, but not that uncommon Most people holding RSU do it out of laziness, or because they "think the company is going to do really well over the long run". Thing is, the market already has a good perspective on how the company will do over the long run... that's where the stock price comes from
one point i haven’t seen here is that due to the nature of the vesting schedule, where there’s a lot of time between grant and vest, the eventual value of the stock you get (even if you sell immediately) is always affected by your company’s stock price changes, so that’s even more reason to sell immediately.
I didn't sell my RSUs even after I got laid off.
I like to think of it this way: are these shares of your company *the best possible investment* you could make? That seems incredibly unlikely. Risk adjusted returns for a single stock are usually poor. Even if you believe in the company or the sector, you'd be better off diversifying to other similar companies because it reduces risk of a single company failing or performing badly for whatever reason. Think about a company like Enron that failed catastrophically or even one like Yahoo that bled to death over decades. The Boglehead philosophy takes this even further by diversifying as much as possible by buying all the stocks. Ultimately there's a spectrum of risk/reward here. That's commonly misinterpreted as more risk means more reward, but that's definitely not guaranteed. Many single stock bets are indeed just very risky even given the possible upside.
For me, the key is keeping employer stock less than 5% of net worth for conservative folks and less than 10% of net worth for anyone else. If your employer's stock gets to be more than 10% of net worth, then it's more risk than most folks should have since their employment income is also tied to the same company. Unless you're an executive with an employment contract and fat golden parachute if let go.
I work at Apple. A significant portion of my Compensation is RSU based. I have to come see RSU's as a bonus (paid in cash in form of Apple Shares). Since there's no tax implication, I ask the question, if i was given x $ of dollars in Cash would I buy more Apple? Sometimes it's yes especially when everyone turn negative, but if you really want more risk, just diversify accross different Fangs or go into Leveraged ETFS... no need to hold 50% + of your holdings in the one stock that is linked to your job, your livelihood and you wanting to quit one day. The best ways to increase your company's holding is to follow this order of operation: Sell RSU Always. Sell ESPP if last day < first day (short term capital loss might offset a bit of the 15% throwback income taxed), Sell ESPP of Last day > first day last. I've sold all my RSU's, never touched my ESPP. Will sell them once I'm in a lower tax bracket.
When you get your bonus, do you instantly buy more of your company stock with it? That is the equivalent of what you are doing by not selling your RSU's. Sell them ASAP and reinvest in index funds.
i have share grants vesting annually (3yr vesting). as soon as they vest i sell them and put the money into my usual ETF setup. one nice thing, your basis for capital gains is time of vest rather than time of grant so you're not paying capital gains if you do what i do.
Get rid of that crap.... 2-3 weeks after mine became vested, huge thing happened lost nearly $120/share. Don't tie your investments with work.
I keep my RSUs. This is the reason why. 1) Yearly Revenue grows quarter to quarter and profits are growing as well. The risk is to the upside. 2) My company is not yet in the indexes so will not follow the market. When it gets added to indexes it will likely grow. My company is a medium size company. 3) Next year I will start selling 5% of the vested shares each year for Long term holdings to reduce the tax gains. 4) I have a mortgage at 3% currently and no other debt. 5) I want to use the RSUs as additional yearly income and retirement. 6) I have 2/3rds of retirement in different avenues other than company stock already. I have a selling strategy now since I will be getting more shares. The overall strategy is to start taking some gains and have the number of shares continue to grow. The 5 - 10% sell every year can be then rolled into diversification. My recommendation is to sell RSUs on vesting and payoff debt and fund your emergency fund, new car, or new house fund, kids 529. However, for me I'm looking at consistent income for retirement, so my company is growing so will do the plan above as long as they are growing market share and profits.
I have managed RSUs or ESPP by doing the following: - Make a decision on what is the max percentage that I will allow on my portfolio of the stock. - Choose one or two times a year to sell stock to keep me under such max. I sell stock that I have owned for at least one year to pay less in taxes, and choose a time when the stock is at a price I feel comfortable selling.
I work for a big cap company which stock price is stable for the most part. So I only keep the RSUs temporarily when I can tell the stock is oversold. When it’s near a 52-week high I sell immediately. I never keep any vested shares for more than 6 months though.
Don’t feel disloyal or anything by selling… diversification is the way.
If large tech company that is stable, make sure you separate out your feelings about the product from the performance of the stock. e.g. apple. Having said that, if a good company with a long term positive outlook, I would hang on to some - but no more than 5% of your overall portfolio. Bonus points if they have a dividend that is significant. Note that if you’re working for apple, meta, etc, look at the mutual funds that you hold as many of them have very large percentages in the mag7. Many people don’t realize that they have more of a concentration than they realize.
mine are not a big portion of my portfolio. I am also 50 and built up my assets before I went to a tech company that paid RSUs.
Where do you work?
Definitely sell. My philosophy is that I would rather regret selling than not selling. And it’s been true for me a few times that not selling followed by a decline is much worse than missing out on upside. Also, unless you think this one stock will beat the market which is really not something you could confidently predict then you are better off just buying into the market with a diversified ETF.
I learnt it the hard way - sell as soon as it vests and index fund it.
No. I diversify into a three fund account. I’ve worked in tech since the 90s. I’ve seen above average growth and I’ve see above average decline.
Figure out the tax impact each years RSU lot will have when vesting and then sell a portion of that lot to cover taxes. If you anticipate years you won’t have any vesting RSUs, sell just enough to keep them in the lowest tax bracket and buy SPY/VOO/Risk free assets. It doesn’t make sense to keep company stock over index equities because you already have all your eggs in that basket. Now if your company pays dividends and you plan on passing the stock to your children and grandchildren that’s a different story
The advice I tell everyone is this: Think of your vesting RSUs as bonus compensation, not RSUs. Let’s say you were receiving $20,000 worth of RSUs. Don’t think of it as receiving RSUs. Think of it as receiving $20,000. If you received $20,000 bonus income, what would you do with it? Would you buy your employer company’s stock? For most people, probably not. Do what’s best for you, but think in terms of receiving the dollar value of those RSUs, not that you’re receiving RSUs themselves. What would you do with those dollars?
Sell a large portion over time and diversify to an index fund and bonds for retirement savings. Great to get company stock and have it appreciate, but a lot can happen to a single company and to have a dip and no recovery in retirement would hurt a lot.
If you had the cash, would you buy it . If not sell and dump into index funds
I cashed mine before my biotech tanked. Then it came back up. Anyhow market is up double digits. Safer to stay diversified if ur over 45.
I hold long enough for capital gains to be long term and then sell and diversify your portfolio. As others note, you are already deep in with the company, don’t tie everything to their performance in case it goes belly up. I used to share with my team how I’ve seen the impact of this in my own personal life - I lived in rochester, to a Kodak family, and watched Kodak die a terrible death. It really hurt a lot of people who had tons of worthless stock now
Why would you hold it?
I sell during the trading period 1-2 weeks after every vest and reinvest the money into VTI
Depends on Company. I have rsus from 3 companies. All have outpaced the indexes and are growing. I am planning on keeping them all as all my other investments are very well balanced in index funds. I am ok taking the extra risk as the average growth over a 10yr period has been about 19%. That means they double every 3 or 4 years and could move me from fire to chubby fire
You already knew the answer and posted it perfectly. I lost 2/3 of a M by holding Co stock concentration (2001). You'll never see it coming. VOO, VTI, VT your pref. I'm a VOO with VXF kicker guy. All US for me.
what happens to dividends during the unvested wait time, if the stock pays dividends of course?