No. of Recommendations: 0
One of my sons is a fairly new employee at Microsoft. He started in August 2022 and has been participating in their ESOP, where he gets a 10% discount on the current price. The company buys shares for him quarterly, and it's just an automatic deal obviously that's oblivious to price and value.
Many people in these plans, from what I understand, use this discount to buy and then immediately sell the shares to capture the discount (less ST cap gain taxes). I told my son he should just amass as many shares as possible, thinking that MSFT could be a good LT investment and over the very LT he would come out better.
But with the huge recent runup in the price of MSFT is that still the case? He's about to hit the point where he could sell at the LT cap gain rate, so that's what's triggering my question I guess.
His stock portfolio is basically 50% Berkshire and 50% MSFT at this point, and his basis in MSFT is about 250.
No. of Recommendations: 8
The problem is that you have too much of your financial life invested in one company. Your paycheck and your investments.
His stock portfolio is basically 50% Berkshire and 50% MSFT
BRK is okay, it is essentially a very diversified mutual fund. But 50% in any single company like MSFT and you are subject to the risk of not being diversified.
When I was at Motorola one of my co-workers put 100% of his 401K into Motorola stock, and was planning to retire (early) in the next year. This was in the late 1990's. Then 2000 happened and Moto crashed from 200 down to 50. Needless to say, he had to cancel his early retirement plan.
He was still working there when I left in 2006.
A 10% discount is a gain of 11%. Take the money and put it in S&P 500. To get LTCG, just wait a year to sell it.
