Should employees diversify by selling off shares in their employer?

I remember a Bank of Ireland employee telling me that she was told by the bank that they would take a dim view of her selling her shares. She lost heavily and was made redundant anyway.

I doubt it would be expressed as a formal condition of promotion. I would be wary of working for a company like that.

Brendan
 
I don't think there is one strategy on this can would be 100% correct.

People have different needs and investment outside of a company share schemes may not be for everyone and understanding investments that are available to potential investors is difficult.

I can only use our experience, we both had/have RSUs etc in various companies for over 20 years and in general we have held these for a long period, on average greater than 5 years, and selling portions when the stock price was either at a record or when external issues forced us to sell.
The company's we worked/working for are large and they pay dividends and on average our gross dividend yield has been approximately 3.3% , obviously tax and fx influence the net amount.

While people may think its foolhardy to have all our eggs in one basket it has , for us , worked. And I know of others in other companies who have done the same.

Its really a personal choice and if the strategy of holding onto shares works for your financial needs why change it?

Again this is our experience.
 
Share options can also act as a golden handcuff, making people stay perhaps for longer then they would otherwise. it's also a very cost effective means of paying bonuses for companies, especially in an MNC where the focus can often be on quarter by quarter numbers and not on the long term.

But it's madness to put all of your eggs in one basket. I can name people who were wiped out when Anglo went or when the share price of Irish banks and banks like RBS tanked. By all means keep some, but don't bet your entire future on the whims of one board of directors
 
Brendan Burgess said:
Hi ashambles

If I have €250k in shares in one company and no other investable assets, I should sell 90% of those shares.

Whether I bought them for €10k, got a present of them, or bought them for €300k is just not relevant, other than the timing for tax purposes.

Brendan
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Anyone following the advice above wouldn't get to 250k from 10k they'd have had to sell at maybe 20k(?) if someone had no other investible assets.

The initial investment is relevant is because there should be a difference in advice given to someone who's over several years - due to patience, laziness, never panic selling etc..
turned 25k into 250k with just one company stock.
versus someone who has
turned 300k into 250k with just one company stock

In the first case here you'd have to think there's at least a possibility they know what they're doing, and should make any decisions to diversify on their own schedule.

Also I'm ignoring companies like the Irish banks - sell any shares in them as soon as you get them, I'm talking only about MNCs like US tech/pharma companies based here.
 
In my own case my share portfolio consists of approximately 4% of the company I work for which is ok. What I have noticed over the years is employees of MNC use both bonus and salary forgone to purchase shares and sell after 3 year rule on a continuous basis .. This is then repeated every year. Money is probably used for discretionary spending and not reinvested... That takes effort. The one's who don't sell suffer mainly from inertia as you would need to sell their shares and transfer cash to another stock trader to purchase /invest in other companies... People can be lazy and just take the dividends and most MNC have been giving positive returns up to 2020..
 
ashambles said:
Also I'm ignoring companies like the Irish banks - sell any shares in them as soon as you get them, I'm talking only about MNCs like US tech/pharma companies based here.
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The MNCs here are well established companies and its easy to look at their historical prices, and see what has driven down those prices or indeed driven them up.

A lot of them, if not all , pay dividends too.

Warren Buffet is a long holding investor and he doesn't prescribe short term holdings or investing in stocks for capital appreciation alone, dividends are important to him too.

All investments have an element of risk so its really up to the individual to research the various aspects of holding or selling.

Stock prices are a reflection of what Wall Street thinks what will happen in the future not the past. And are Wall Street always right?
 
Bluefin said:
In my own case my share portfolio consists of approximately 4% of the company I work for which is ok.
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This is completely different. I presume it's a private company, so owning a percentage of it gives you a say in running it.

That is much more like a partnership where the value of your investment is determined to a fair extent by your own and your partners' input.

In any event, there is no harm in owning 4% of a company. For diversification purposes, it is what percentage of your portfolio does it account for?

Brendan
 
Peanuts20 said:
it's also a very cost effective means of paying bonuses for companies, especially in an MNC where the focus can often be on quarter by quarter numbers and not on the long term.
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Also because employers' PRSI @11.05% is not due on share-based compensation the way it is on salary!
 
Apologies if I wasn't clear....

I'm employed by an American multinational (pharma)...

I hold shares in 30 MHC's ranging from tech/pharma /bio/banking/food/beverage and one of my holding is the pharma company that I'm employed by...
 
Bluefin said:
Apologies if I wasn't clear....

I'm employed by an American multinational (pharma)...

I hold shares in 30 MHC's ranging from tech/pharma /bio/banking/food/beverage and one of my holding is the pharma company that I'm employed by...
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Four per cent of that sounds nice!
 
In my case I invest in the revenue approved scheme (up to 16% of salary). No income tax is payable on this if the shares are held for 3 years. I sell at the end of each cycle and the proceeds go to pension AVCs. Feels like you get tax relief on the same money twice.
Initially I did let them build up until I realised I was losing my CGT exemption every year.
 
losttheplot said:
In my case I invest in the revenue approved scheme (up to 16% of salary). No income tax is payable on this if the shares are held for 3 years. I sell at the end of each cycle and the proceeds go to pension AVCs. Feels like you get tax relief on the same money twice.
Initially I did let them build up until I realised I was losing my CGT exemption every year.
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This is a savvy move.
 
What is being said on this thread make sense, but often the provision of RSUs and stock is not well understood by the individual. A lot of large MNCs in Ireland now provide RSUs as part of the package to people day 1, so there is an aspect of financial literacy and risk to understand. These RSUs are provided to people straight out of college, who have yet to fully grasp their finances.

I have seen personally the provision of RSUs on an annual basis that vest quarterly over 4 years e.g. 100 RSUs awarded that splits to ~6 per quarter. So generally you are always waiting until the end of the vesting period to get the full amount.

Given the stock market performance this year, perhaps now is a good opportunity to realize losses on the RSUs that can be carried forward indefinitely to reduce CGT in future years.
 
Brendan Burgess said:
I doubt it would be expressed as a formal condition of promotion. I would be wary of working for a company like that.
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I am very surprised by the claim that any large firm makes holding shares a formal condition of promotion.

I really doubt it would survive at the WRC as it is a form of indirect discrimination which is illegal.
 
Concentration gives the opportunity of outsized returns. But also of outsized losses.
 
If you are entitled to collect a future number of shares per quarter for 4 years, you effectively already have a sizeable amount already invested in your employer. You should probably include those future shares when considering how much of your net worth is tied up in the company.
 
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