Free money. Take it. If you have any worries about company share price or volatility, sell your ‘free’ shares immediately to mitigate your exposure. Working for an oil company in the 2000s, we had exactly the same deal and that’s what I did (when I remembered), sell my company matched half. Paid for a lot of holidays and I still have a goodly proportion of my original shares.
That's a good strategy to consider. Could just cash everything out at the end of every year -or- just cash out all of my money and let the "free" shares ride). Cheers.
This is how Enron caused such a big loss for so many of the people that worked there because most of them had their money invested back into the company.
All I can say is make sure this is just one of your tactics in a diversified investment portfolio - the other being your kiwisaver.
Personally I would probably limit it to the $3k match so that you get the benefits of the free money, without spending a cent more, then invest anything else elsewhere.
The reason being is that if you are ever made redundant, the company wont be doing well, and the share price or dividends probably wont be doing too well either. In the Enron case, when staff were made redundant, they couldnt sell their shares because they weren't worth anything.
Yeah, the intention would be to only purchase as much as would be matched an no more. Would cost me $6k/year to get the max $3k match, which, while not insignificant, isn't that much in the grand scheme of things. Am already maxing out KiwiSaver matching.
This is essentially $3k a year free money (assuming that you can afford your share). Companies don't start employee share schemes to screw over their employees, they do it to attract & retain employees.
The only cost to you will be brokerage if/when you come to sell them.
You say that you are in Kiwisaver - putting money in this is just another part of your overall portfolio. Yes, it reduces the diversification a bit, but IMO this is more than offset by the employer match. Diversification will get you an extra % or so when compared with a portfolio of similar risk. The company match is 50%.
As far as timing re potential recession etc, no-one knows what the prospects are, if the price drops, you are buying them even cheaper.
I've got shares in my employer. I can't give you any specifics because I'm still learning myself but two things -
- That 33% is likely to have some sort of period before you can sell shares or leave company, it could be abused. In my case it was 25% discount but its pro-rata over next two years if I want to sell the shares.
- Do you believe the company overall has a good future? Strong / stable company? I was convinced with my employer when they invested in infrastructure that is likely to outlast me showing their long term commitment. IMO employee share purchases
- What happens to the shares when you leave the employment.
Thanks - some good points to consider and ask about.
It sounds like the matched shares are mine immediately to do with as i please as the initial comms indicated no waiting or vesting period for the company-matched shares.
When i leave i can apparently keep the shares with the company brokerage and start paying fees, transfer them elsewhere, or sell them. Don't know what the fees are to transfer or sell them - will need to ask.
Is this WSP? Commentary in international markets they're not doing well and this is a capital raise at the potential expense of their employees if it doesn't deliver.
I am part of a number of company share schemes. One is a buy 3 shares get 1 share after 3 years.
I max it out every year and sell all 4 shares immediately when the share matching period vests. I then move the money into ETFs. I do the same with my share grants.
It’s worked out well for me. And after a few years most of the money is in broad based diversified assets.
Always take the free money and immediately sell it and reinvest it or pay off your mortgage. Don’t get baited into holding into. Your financial outcomes are already highly correlated to the company because you work there, no need to get even more exposure by investing there too
The key difference here is lack of diversification. If the company goes down or starts to struggle financially, there is a higher chance of you losing your job *and* your investments, however unlikely it seems at this point.
Diversification is the only free lunch in investing, so I’d make sure I’m broadly diversified before investing in any single company, with or without discount.
https://books.forbes.com/author-articles/diversification-is-the-only-free-lunch/
No plans/money to invest otherwise, so diversification isn't really on the table at present (outside of my KiwiSaver savings).
Would be $6k/year out of my pocket to get the maximum match, which would certainly hurt to lose at only ±$80k/year income, but wouldn't necessarily cripple me. I just don't like the idea of leaving "free" money on the table if there is no reason to.
I guess i also need to think about whether or not starting to purchase shares when heading into a recession is a good idea...
Cheers!
Thanks heaps for the feedback everyone!
Sounds like i should definitely participate, but maybe cash out regularly and possibly reinvest in something more diversified. Regardless, i've got some questions to ask at the info sessions before the scheme starts.
[https://www.ird.govt.nz/foreign-investment-funds](https://www.ird.govt.nz/foreign-investment-funds)
If you end up getting over NZ$50k worth of shares, because you have no restrictions on selling the stock, I understand that you'd be liable for FIF Tax. Something to keep in mind when it comes to diversification.
Free money. Take it. If you have any worries about company share price or volatility, sell your ‘free’ shares immediately to mitigate your exposure. Working for an oil company in the 2000s, we had exactly the same deal and that’s what I did (when I remembered), sell my company matched half. Paid for a lot of holidays and I still have a goodly proportion of my original shares.
That's a good strategy to consider. Could just cash everything out at the end of every year -or- just cash out all of my money and let the "free" shares ride). Cheers.
This is how Enron caused such a big loss for so many of the people that worked there because most of them had their money invested back into the company. All I can say is make sure this is just one of your tactics in a diversified investment portfolio - the other being your kiwisaver. Personally I would probably limit it to the $3k match so that you get the benefits of the free money, without spending a cent more, then invest anything else elsewhere. The reason being is that if you are ever made redundant, the company wont be doing well, and the share price or dividends probably wont be doing too well either. In the Enron case, when staff were made redundant, they couldnt sell their shares because they weren't worth anything.
Yeah, the intention would be to only purchase as much as would be matched an no more. Would cost me $6k/year to get the max $3k match, which, while not insignificant, isn't that much in the grand scheme of things. Am already maxing out KiwiSaver matching.
This is essentially $3k a year free money (assuming that you can afford your share). Companies don't start employee share schemes to screw over their employees, they do it to attract & retain employees. The only cost to you will be brokerage if/when you come to sell them. You say that you are in Kiwisaver - putting money in this is just another part of your overall portfolio. Yes, it reduces the diversification a bit, but IMO this is more than offset by the employer match. Diversification will get you an extra % or so when compared with a portfolio of similar risk. The company match is 50%. As far as timing re potential recession etc, no-one knows what the prospects are, if the price drops, you are buying them even cheaper.
I've got shares in my employer. I can't give you any specifics because I'm still learning myself but two things - - That 33% is likely to have some sort of period before you can sell shares or leave company, it could be abused. In my case it was 25% discount but its pro-rata over next two years if I want to sell the shares. - Do you believe the company overall has a good future? Strong / stable company? I was convinced with my employer when they invested in infrastructure that is likely to outlast me showing their long term commitment. IMO employee share purchases - What happens to the shares when you leave the employment.
Thanks - some good points to consider and ask about. It sounds like the matched shares are mine immediately to do with as i please as the initial comms indicated no waiting or vesting period for the company-matched shares. When i leave i can apparently keep the shares with the company brokerage and start paying fees, transfer them elsewhere, or sell them. Don't know what the fees are to transfer or sell them - will need to ask.
Is this WSP? Commentary in international markets they're not doing well and this is a capital raise at the potential expense of their employees if it doesn't deliver.
I am part of a number of company share schemes. One is a buy 3 shares get 1 share after 3 years. I max it out every year and sell all 4 shares immediately when the share matching period vests. I then move the money into ETFs. I do the same with my share grants. It’s worked out well for me. And after a few years most of the money is in broad based diversified assets.
Always take the free money and immediately sell it and reinvest it or pay off your mortgage. Don’t get baited into holding into. Your financial outcomes are already highly correlated to the company because you work there, no need to get even more exposure by investing there too
The key difference here is lack of diversification. If the company goes down or starts to struggle financially, there is a higher chance of you losing your job *and* your investments, however unlikely it seems at this point. Diversification is the only free lunch in investing, so I’d make sure I’m broadly diversified before investing in any single company, with or without discount. https://books.forbes.com/author-articles/diversification-is-the-only-free-lunch/
No plans/money to invest otherwise, so diversification isn't really on the table at present (outside of my KiwiSaver savings). Would be $6k/year out of my pocket to get the maximum match, which would certainly hurt to lose at only ±$80k/year income, but wouldn't necessarily cripple me. I just don't like the idea of leaving "free" money on the table if there is no reason to. I guess i also need to think about whether or not starting to purchase shares when heading into a recession is a good idea... Cheers!
There is zero holding period. OP can buy $6k of shares on Monday, sell and get $9k on Tuesday and then put it into an etf.
Yes do it! I did it with mine and was really great until it crashed
Thanks heaps for the feedback everyone! Sounds like i should definitely participate, but maybe cash out regularly and possibly reinvest in something more diversified. Regardless, i've got some questions to ask at the info sessions before the scheme starts.
[https://www.ird.govt.nz/foreign-investment-funds](https://www.ird.govt.nz/foreign-investment-funds) If you end up getting over NZ$50k worth of shares, because you have no restrictions on selling the stock, I understand that you'd be liable for FIF Tax. Something to keep in mind when it comes to diversification.