Make money with stock investing


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Buy Your Company's Stock?

For some people, this subject conjureson the 15% purchase discount) no matter
images of the devils in management atthe how the stock performs.
Enron, WorldCom and other bankruptLet's say you start putting money into
former high flyers. Mesmerized by theyour ESPP at the beginning of the
sweet profit projections coming fromoffering period when the price of your
their corporate chieftains, all too manycompany's stock is 20, but at the end of
employees of these firms put all ofthe offering period the price is down to
their retirement nest egg in company15.
stock. When the company was riding high,In this case, you can buy the stock for
they were wealthy on paper. When the15 less the typical 15% discount.
company and stock collapsed, they wereThat's when the selling decision becomes
devastated.critical. Many times you are able to
Of course, everyone now knows that it issell as soon as the offering period
a mistake to place all your chips inends, and you can immediately pocket
your company's stock.that 17.6% profit.
It can be an even bigger mistake toIf you hang onto those shares until the
leave your money there for an extendednext selling period, you're taking on
period of time. That's where the Enronthe market risk that your shares might
and WorldCom employees took a pasting.decline in value. Of course, the stock
They failed to sell some or all of theircould take off and pad your gain. If one
shares at the time the stock price wassales period is July 1, for example,
peaking and turning south. In most caseskeeping those shares would have been a
they had time to salvage at least agood idea this year with the DOW and
portion their nest egg; too manyNASDAQ in the early stages of a long
hesitated and lost all.rally. If the selling period is, say,
Despite the horror stories of the past,early in 2004, you might consider an
employee stock purchase plans, or ESPPs,immediate sale because the rally has
can be a good deal.gone a long way and your stock could
You get shares at a discount, and inbe vulnerable to a sell-off.
most cases you can sell your shares andMost important, don't ignore the shares
pocket the cash. The returns willbuilding up in your account and count on
supplement your IRA, 401K or otherthe continuing goodwill of your
employer-sponsored retirement plan. Youcompany's management. That's what got
just have to be careful about monitoringEnron's employee-shareholders into
the stock and picking the right buy andtrouble.
sell points.Sit down with your financial adviser and
Make sure to check with the humandecide whether to sell or hold. Take
relations department at your company forcontrol of your future!
specifics on your plan.In your deliberations, you'll have to
The key question to ask: When can Iconsider the tax consequences. If you
sell? You want as much flexibility assell immediately, the proceeds will be
possible to avoid an Enron-style fiasco.taxed as ordinary income. If you hold a
Some companies allow you to sell onlyyear or longer, the proceeds will be
once a year, and some allow it twice ataxed at the lower capital gains rate.
year.There are other tax considerations; see
Companies also establish "offeringyour financial adviser before making
periods" when employees can purchaseyour move.
stock, often at a discount of 15%. InThis is a good time to find out what is
about 80% of the plans, the purchaseavailable at your company. ESPPs are
price is determined on the first or lastusually available to all employees,
day of the offering period, whichever isunlike stock options that tend to be
lower. This is a great deal because youhanded out to upper management. Handling
have a built-in profit of 17.6% (basedoptions is another story entirely.



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