What to do with extra money originally deferred for company ESPP?
July 31, 2016 2:24 PM Subscribe
I recently quit my job and started another, with my termination date unfortunately a day before the company purchases shares for an ESPP. So I now have a good chunk of money originally set aside for investing in my (now former) company. Any suggestions what I should do with it? Single-stocks, mutual funds, robo-advisors (e.g. Wealthfront), Roth IRA, index funds? About me: I'm 29, single male, renting, no loans or debts, and make a decent salary as a Silicon Valley medical device engineer, so I'm not pressed for cash or anything and are more open to risk. No need for specifics, just some ideas.
You perhaps should think about a personal financial portfolio plan. What is your current percentage allocation to fixed income securities (bonds) vs stock market investments? Once you decide on that, you can split the money accordingly.
Then decide on how to invest each of those allocations, e.g. CDs for the fixed income portion and indexed funds for the stock market portion.
To decide on the asset allocation percentages, consider your risk tolerance level. Most people *overestimate* their risk tolerance. Other consideration: I see you're working in Silicon Valley so the first question I'd ask is "How secure is your job?" If job security is lower than average, then a higher portion of your assets should be in fixed income securities.
Personally I would recommend a maximum of 50% stock market investments and 50% fixed income as a portfolio that would be tolerably risky for most people.
I would strongly recommend good books on investing such as The Four Pillars of Investing and A Random Walk Down Walk Street.
Financial health is like physical health, some knowledge of the fundamentals is critical to help steer you away from fads and the rampant bad advice you'll find on the Net.
posted by storybored at 4:55 PM on July 31, 2016
Then decide on how to invest each of those allocations, e.g. CDs for the fixed income portion and indexed funds for the stock market portion.
To decide on the asset allocation percentages, consider your risk tolerance level. Most people *overestimate* their risk tolerance. Other consideration: I see you're working in Silicon Valley so the first question I'd ask is "How secure is your job?" If job security is lower than average, then a higher portion of your assets should be in fixed income securities.
Personally I would recommend a maximum of 50% stock market investments and 50% fixed income as a portfolio that would be tolerably risky for most people.
I would strongly recommend good books on investing such as The Four Pillars of Investing and A Random Walk Down Walk Street.
Financial health is like physical health, some knowledge of the fundamentals is critical to help steer you away from fads and the rampant bad advice you'll find on the Net.
posted by storybored at 4:55 PM on July 31, 2016
If you already have retirement accounts with a balanced portfolio based on your long term goals blah blah blah (I'm guessing you do since you seem to have all the vocabulary) then the typical Metafilter financial advice isn't as relevant for you.
Do you like gambling? Do you want to get a visceral feel for how the market works? Can you afford to lose the entirety of your ESPP contribution? Research a single stock to buy with it. It's a great way to learn the fundamentals. They had us do this in high school (by just picking, no actual money involved), but with nothing at stake it didn't leave much of an impression and entirely skipped the logistical lessons of being an active investor.
I think it'll also give you perspective on whether you actually want to keep your existing company stock.
posted by danny the boy at 6:34 PM on July 31, 2016
Do you like gambling? Do you want to get a visceral feel for how the market works? Can you afford to lose the entirety of your ESPP contribution? Research a single stock to buy with it. It's a great way to learn the fundamentals. They had us do this in high school (by just picking, no actual money involved), but with nothing at stake it didn't leave much of an impression and entirely skipped the logistical lessons of being an active investor.
I think it'll also give you perspective on whether you actually want to keep your existing company stock.
posted by danny the boy at 6:34 PM on July 31, 2016
I used to enjoy picking stocks. Then I got busy, and also noticed that I was barely beating the market, so it wasn't worth the trouble.
Put the money in a Roth IRA, buying either an S&P500 or a total market index. Keep in mind that there's an income-limit for the Roth, though, and you can only contribute $5500. If you're over the limit, stick to a regular account.
posted by redlines at 11:12 PM on July 31, 2016
Put the money in a Roth IRA, buying either an S&P500 or a total market index. Keep in mind that there's an income-limit for the Roth, though, and you can only contribute $5500. If you're over the limit, stick to a regular account.
posted by redlines at 11:12 PM on July 31, 2016
Yeah I was going to suggest you max out your 401K/IRA contributions before investing in anything else, especially if your new employer matches any part of the 401K funds.
posted by bologna on wry at 9:27 AM on August 1, 2016
posted by bologna on wry at 9:27 AM on August 1, 2016
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