ESOP advice

[chucky almendinger]

My company has an ESOP plan. You get to buy stock at a discount of 15%. The longer you hold the stock, the better you're tax situation will be.

At first I was happy about this, but now:
1)The finance gurus tell us that diversification is the only way to fly. Putting a big chunk of investments in one company flies in the face of this.

2)Moreover, I already have a huge stake in the company, since they pay my salary and will be giving me any raises.

Is there anyway to make diversification arrangements with other esop holders, without selling? I know the Fat Cats do this, but they have alot of money at stake, and they pay people like Golman & Sachs to set it up.

Thoughts?

[Ms. Re]

buy the stock at the 15% discount, and then turn around the next day and sell it...take your 15% profit and don't worry about it -- then you'll be just like the big wigs at your company who exercise their stock options and turn right around and sell it

as for diversification, yes IB's will be willing to construct a swap for you, but you'd have to have a fairly substantial sum in the stock before it would be worth their while

[WWSituation]

Any finance guru that tells you to turn your back on an automatic 15% is a total moron. No amount of diversification will get you that.

Also, it sounds like the plan is an ESPP, not an ESOP, but either way, take the discount and do your research like you would any other of your investments.

If the company is doing well, it would be wise to hold for at least 1.5 years to get the preferable tax treatment.

[Dr T Non-Fan]

My account will automatically sell the stock when it's put into my account, under the impression that if it's an automatic deal, you can't be caught for insider trading.

If your company is in great shape, and the stock ebbs and flows with the industry for the most part, then:
1. When the stock price is based on the beginning of the period (implying current stock price is high), then sell the stock, take the 15%+.
2. When the stock price is based on the end of period price (implying that the stock has dropped), then hold it until the next time. Worst that could happen is that company stock price goes into long-term decline. You'd be betting against this. I'd hope you have some knowledge that this wouldn't happen. If you knew, you should be looking for a new job.

Whatever occurs, it's free money, and attempt to shore up cash flow to max out on this (until inflation rises above some amount). You make at least 10% of whatever you put in per half-year. That's a good return.