I created a sock to ask this...

In my 10+ years with a company, I've acquired a little under 7 figures in company stock which I've failed to do anything with. I like my company and feel like were a leader in our industry (no excuse to be that heavy in the stock). Every time I convince myself to sell, i get cold feet not knowing what to buy and not wanting to be in cash. Any advice?

My info:
I have a mortgage, but I'm not excited about paying it off as I move a lot.
No other debt
Have a few 100k of cash in a savings acct that I'm scared to do anything with
Max my 401k, hsa
Contribute to 529s for each kiddo
Have about 500k in post tax dollars in an Etrade account where I own shares of various companies that I bought based on my Morningstar subscription. Almost all of it is overvalued now according to the service so I can't find much else I want to own. I started this account just to learn and play around and it's grown into a significant amount now.
Mid 30s married single income with a few kids
I have sufficient life insurance and emergency cash
I work a lot and I'm not interested in buying or starting a business, rental stuff, etc. I spend enough time away from family with my current gig.

Thanks for any advice. I know the basics about investing and enjoy this forum but investing is not my thing. I feel dumb being so heavily invested in the company which already signs my check. I know that's historically proven to be a mistake. Don't be too hard on me.

you are mid 30s, have a stable well paying job, wife stays at home, you have a few kids, and family time is a priority. you have almost a million in retirement fund, 500k in after tax stock investments, hsa and 529 are set, and you have a few hundred thou in cash because why not.

and you came to Texags for advice? LOL.

I'm embarrassed to offer you advice. but the easy advice would be:
1) Lets say you had already sold all your company stock for a combination of S&P 500 index and International Index, with a dash of bonds. Would it be the right move to sell it all now and buy your company stock?
2) get rid of cash and pay off the house.

lol

I started at tail end of Lucent. The "old timers" at every sales mtg would always talk about the stock price ( high of $86). Then over a quick few week went all the way down to $7

Now..... You want to hang on to yours?

Many a old timers lost millions "over night"

Sell !!!!!!

Concur. Sell!!

Sell stock. Buy commercial real estate and/or rental properties. Hire a management company for the properties. Enjoy a safer, stable investment.

Are you required to hold a minimum $ amount of company stock?

LostInLA07 had a very important question. I'm also curious how you acquired the position? Was it equity comp, ESPP, buying on your own, maybe some combination?

Depending on how you did so, my first advice would be to stop growing the problem by diversifying out of the portions with the lowest tax cost (assuming it isn't levered i.e. options/SARs). This might be positions in 401(k), deferred comp, or very recently vested/future vesting RSUs, etc.

Next I would look at any options/SARs you may have that are nearing the end of the typical 10 yr expiration. If you are getting under 4 years left and they are highly appreciated, I would consider selling even though the tax cost would likely be high. The reason, if the market/company takes a hit in next year or so, they may not have time to recover to current values. If you go through Black-Scholes (or other, potentially more appropriate models) calculations, you can get a feel for the sensitivity to the various greeks and make more informed decisions from there. Depending on your income level, triggering a lot of additional income could subject other income to NIIT, so be aware of income thresholds you would prefer not to cross. A CPA or good advisor can help with this.

Buying puts could be an option (get it? ) for you if the company has a healthy option market. If it doesn't you could consider a sector or broad market proxy. This would allow you to temporarily hedge some of your risk and define an exit if the shares tank. How you own the shares (what accounts, are the held as outright shares) matters a lot in this decision.

If the shares are mostly held outright in a taxable account, exchange funds, delta shifting, covered call strategies, Variable Pre-Paid forward, and a few other ideas, could all make sense, given the size of the position. These would merit significant investigation/education before committing to.

While I am a huge advocate of not having more than 10% exposure to a single stock, especially the one your income comes from, getting there can be a multi-year (maybe decade+) process.

However it came about, great job accumulating the wealth. Hopefully you have a good feel for what you want it to do for you, which should inform the actions you take to reduce risk while balancing against tax and oppty costs.

Is this public or private stock? If public, there are a number of transactions you could effect that would monetize your position. The first, zero premium collars, effectively locks the value of the position, which allows you to borrow against at ~100% LTV. Another is a pre-paid forward, which allows you to receive up to 90% of value up-front, and defer taxes until the agreed upon forward date, at which you can either deliver the stock or the cash.

These types of transactions aren't typically offered/needed in a branch, but it sounds like you have $1MM+ in investable assets so I'm sure any of the private banking/wealth mgmt units at a JPM/UBS/MS etc would be able to assist. Even if this is a private stock, you would still be able to borrow against and invest proceeds in diversified portfolio, not sure at what LTV though. Easier if company has public debt.

I've seen the negative consequences of being over concentrated in the company stock when things go wrong, but most of them were people much closer to retirement than you.

Your appetite for risk is the biggest driver. How would you feel if your stock lost 50% + of it's value and you lost your job in the next month? How would it impact your family's lifestyle? If you're asking, I assume this is on your mind, so what now?

I assume much of your holdings are due to stock options or some sort of purchase plan. To hedge, you can buy put options as mentioned by others. Think of it as buying insurance, but it won't be cheap.

If you have shares that aren't restricted, an easy way to start trimming your holdings is to gift appreciated shares for your philanthropic giving. You'll simultaneously reduce your position, avoid cap gains tax, and make your tax deductable gift. A donor advised fund can make it very convenient.

If you've never sold shares, consider using specific share accounting when selling or gifting. Consulting a tax advisor would be advisable.

You may never get your position below the amount most advisors recommend if you're continuing to receive shares in some form your employer, but you can take a page from some folks that have found themselves in similar situations. Bill Gates, Michael Dell, Mark Zuckerburg, etc all sell shares on a regular schedule, basically averaging out of their company stock even as they continue to acquire more.

It's a good problem to have, I wish you luck!

No advice to give, but congrats on the solid financial situation.

Maybe buy yourself a Mustang GT350R or donate more to Aggie football.

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I own shares of various companies that I bought based on my Morningstar subscription

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What strategy did you use when you used your Morningstar subscription?

Thanks for all the advice. I love TexAgs. I guess I shouldn't be surprised by the response. Not sure why I've been so hesitant to do something about it other than just fear of missing a run up in my companies stock price and fear of moving it into something that performs worse. Really I think it's just a fear of making a mistake. But no decision is a decision, I guess. Here are answers to a few of the questions:

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1) Lets say you had already sold all your company stock for a combination of S&P 500 index and International Index, with a dash of bonds. Would it be the right move to sell it all now and buy your company stock?

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That makes complete sense.

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Sell stock. Buy commercial real estate and/or rental properties. Hire a management company for the properties. Enjoy a safer, stable investment.

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How does one go about buying commercial RE?

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Are you required to hold a minimum $ amount of company stock?

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Nope.

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LostInLA07 had a very important question. I'm also curious how you acquired the position? Was it equity comp, ESPP, buying on your own, maybe some combination?

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It's a combination of restricted shares, exercised options, and ESPP

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Is this public or private stock? If public, there are a number of transactions you could effect that would monetize your position. The first, zero premium collars, effectively locks the value of the position, which allows you to borrow against at ~100% LTV. Another is a pre-paid forward, which allows you to receive up to 90% of value up-front, and defer taxes until the agreed upon forward date, at which you can either deliver the stock or the cash.

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Public. But after that you lost me.


Again, thanks for the help. At this point I'm ready to just sell everything I can, but as several mentioned the tax implications scare the heck out of me. I like the CPA idea. Are there CPAs that would charge by the hour for a consultation? Any ideas on how to find a good one in my area?

Any other ideas on what to do with the cash after selling? I don't need it until retirement, and I'm willing to take some risk having a 20+ year time horizon. Or just buy an S&P index fund?

The transactions I described are a way to monetize your position without selling today. you would consider those if for sentimental/company politics/tax reasons you didn't want to actually liquidate your shares at the moment, but still desired to diversify away from such a concentrated position today.

If the point is diversification, I'm not sure that swapping out of a 100% position in a single company into a handful of CRE/rental properties is that big of an improvement (20-30% in each property, with 100% exposure to an asset class is still very concentrated). I think if you're going the route of liquidation or monetization, you need to invest the proceeds in a well-diversified basket of index funds (Large/Mid/Small US, DM Equities, EM Equities, US Bonds, DM Bonds, EM Bonds).

Good luck and congrats on your success.

I'm assuming you live in Houston and work O&G, but if I missed it, can you add where you live?

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I'm assuming you live in Houston and work O&G, but if I missed it, can you add where you live?

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I'd rather not say. Would my industry or location change how I should handle the situation?

Edit: My location and industry and fact that I'm an aggie might would give away my identity to those that know me. I don't want that to come off the wrong way.

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I'm assuming you live in Houston and work O&G, but if I missed it, can you add where you live?

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I'd rather not say. Would my industry or location change how I should handle the situation?

Edit: My location and industry and fact that I'm an aggie might would give away my identity to those that know me. I don't want that to come off the wrong way.

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Your industry could impact the timing/pacing of working out of your position. While it likely won't drive the decision, if the industry is over/undervalued by a meaningful degree, it should be considered.

For example, if your industry was overvalued by most metrics and your company was even more "expensive", managing taxes become less relevant and capturing value while you can becomes more so.

Understood, but I was asking because you wanted a CPA reco. That's why I was asking, typically you want to do an office visit with a CPA, not do it long distance.

Sell $100K and put it in a Lending Club Account. Another $100K and put it in an REIT fund. Another $100K into long term bonds. Another $200K in large cap. $50K to buy something you want. Another $50K to charity - might I suggest families who are adopting? Keep $200K in company stock if you really believe in it.

It gets easier once you get over your irrational fears. Your problem is fear. You need anxiety counseling more than you need financial counseling.

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It gets easier once you get over your irrational fears. Your problem is fear. You need anxiety counseling more than you need financial counseling.

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1. Sell it all
2. Buying a sandwich franchise in a mall
3. Profit.

Invest in a rental house in a hot market such as Austin... you'll need to look in the 300-400k range. Rents should be about 1500-2500k per month. You'll either have mailbox money if you buy outright, or your renter will be paying for your mortgage & your investment will steadily appreciate.

OP, yeah, I know. If it's any help, you're normal. You just have some abnormal blessings. Don't turn them into a curse by worrying so much. At the other end, you've got people who buy & sell every time the wind changes, and they are just as irrational. I knew a 75 year old man with several million in the market. He was still obsessing every day about the DJIA. He could have gotten 8% in CD's back then, but for some reason he decided he'd rather be checking his stocks than going on cruises...

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Invest in a rental house in a hot market such as Austin... you'll need to look in the 300-400k range. Rents should be about 1500-2500k per month. You'll either have mailbox money if you buy outright, or your renter will be paying for your mortgage & your investment will steadily appreciate.

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Uhm I don't think a house that is in the $300K-$400K range renting at $1500-$2500 is a good investment strategy. You should try to get twice that rent at those prices in my opinoin to make it feasible.


Just super easy numbers:

$400K house

$12K property taxes (3%)
$1K insurance

$30K rent ($2500/month)

Nets you $17K/year which is 4.25% return.

Same numbers at $4K rent nets you a 8.75% return which is much more in line with a Cash purchase.

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$400K house

$1K insurance

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Where is this magic home located? Houston would be $2500.

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Same numbers at $4K rent

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You won't have any takers to rent a 400k house for $4,000/month, at least not in the Austin area. I realize markets are extremely variable. I speak from experience with my own rent houses in this price range.

4-5% return per year isn't bad. In 5-10 years when you sell the house for another 100k over your initial investment the return will be a lot better.

I am aware what it would be, doesn't mean it's a good investment. I personally would never enter into a real estate investment where I was hoping for at best a 4% return. This is just my opinion based upon what you showed. A very basic rule is 1% of value of home should be monthly rent.

Only thing outside of that is if you are expecting the property to be appraising at an accelerated rate and are using that to make the % return something you are more comfortable with. I plan to be in my investments 10+ years so I only look at appreciation as a secondary metric when choosing between properties. Don't want to sidetrack the discussion due to our different viewpoints of this. Just wanted to offer my opinion.

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And these kinds of conversations are why I laugh and shake my head when people start bombarding investments threads with simple statements of "just sell it all and buy a few rent houses/commercial properties, etc.".

It's apparently all so simple, no brainer, amazing money, can't understand why everyone doesn't do it, kinds of decisions.

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Its like listening to the radio ad where hell send you his guranteed methods to have rent estate! Especially now that the housing market is GOING UP UP UP!

Its the Ronco Rotisserie of real estate, set it and forget it!

I just wanna know what OP does for a living to have those assets on a single income

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I just wanna know what OP does for a living to have those assets on a single income

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Poultry Science major!!

Taxes aside..

If someone gave you a million bucks to invest, would you put it all in a single stock?

As someone whose age, financial means, and proclivity to make a hobby of money management (read very little), you need to get professional advice. Taxes may be a much greater immediate threat to your retention of capital, and you need to talk with an accountant to help formulate a strategy to get out of the company stock.

It sucks paying fees, but when you see some of the magic a good accountant can do, you may kick yourself.