40 - Moving up Property Ladder

[Brendan Burgess]

In relation to stock incentive schemes, there's a strong argument for liquidating shares in your employer's company at the earliest opportunity

Especially in this case with a big mortgage and a small pension fund.

Brendan

 

[DublinHead54]

In relation to stock incentive schemes, there's a strong argument for liquidating shares in your employer's company at the earliest opportunity - even if it means reinvesting elsewhere - because depending on one company for your salary/remuneration and for capital appreciation of the shares is concentrating risk in one place unnecessarily. It was on that basis that I always did this when I was a member of a stock incentive scheme.

I agree with the caveat it is ok to leave a portion invested that provides a well diversified investment portfolio. Likely somewhere in the region of 10% per annum. Small enough that you wouldn't cry should the share price crash.

 

[ClubMan]

I agree with the caveat it is ok to leave a portion invested that provides a well diversified investment portfolio. Likely somewhere in the region of 10% per annum. Small enough that you wouldn't cry should the share price crash.

I presume you mean 10% (of what exactly) left in shares in the company that the individual works for?
I have no idea how you come up with the very specific figure of 10% but I disagree anyway.
In general it makes little to no sense from a risk point of view for somebody to put two of their major eggs (salary/remuneration and investment money) in the one place (their employer's company).
That's simply concentrating risk.
In general it would make a lot more sense to cash incentive stocks in as early as possible and invest them elsewhere in a diversified fund/ETF/stock.

 

[DublinHead54]

I presume you mean 10% (of what exactly) left in shares in the company that the individual works for?
I have no idea how you come up with the very specific figure of 10% but I disagree anyway.
In general it makes little to no sense from a risk point of view for somebody to put two of their major eggs (salary/remuneration and investment money) in the one place (their employer's company).
That's simply concentrating risk.
In general it would make a lot more sense to cash incentive stocks in as early as possible and invest them elsewhere in a diversified fund/ETF/stock.

Roughly 10% of the Equity aware is a relatively low risk risk option in terms of a well diversified set of Equities, that % will obviosuly drop when adding in cash savings and other investments in ETFs /Bonds or other.

I disagree that it makes no sense from a risk perspective. Risk operates on a scale and my suggestion is a low risk approach in my opinion, it doesn't need to be all or nothing.

The share price of a company and the individuals employment at that company are not 100% correlated. Take Facebook for example, they've announced thousands of layoffs in the last 6 months yet the share price is up 110%.

Risk is not all or nothing, it is about understanding the risks and taking the risks that allow you to meet your financial goals and sit within your risk tolerance.

This is my approach, and it has worked well for me over the last decade without losing my shirt. In this instance you just have different risk tolerance to me which is fine, it doesn't make either of us wrong.