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