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Coworkers Excited About Investing

This article was written by in Investing. 12 comments.


In the sea of cubicles in my office, two of my coworkers were talking yesterday about their investments. As stocks — primarily our company stock — have increased a little from their recent lows, they seem to believe that this might be a good time to increase 401(k) contributions and enroll in the company stock purchase plan. One of the coworkers is my age and probably has about 30 years before retirement and the other coworker most likely has about 15.

I agree. Giving stocks decades to grow is probably a solid strategy. Some expert financial advisers are calling for more tragedy in stocks for the next year, however. “Dow 4,000″ is a phrase I’ve seen thrown around quite a bit. I do believe that people tend to predict numbers too low for the lows and numbers too high for the highs, but it’s hard to determine which predictions are overblown. A survey of chief financial officers shows that 60% of the sample don’t expect the economy to recover for at least a year. The survey was conducted by the Duke University’s Fuqua School of Business and CFO Magazine, who claim CFO predictions have proved to be accurate. With that in mind, the fact that CFO’s confidence in the economy is the lowest it has been in the 12-year history of the survey is a little disheartening for anyone who is looking for stocks to recover soon.

I recently increased my 401(k) contributions to 50% of my salary — the maximum deferral rate — to come closer to taking full advantage of the investment opportunity. I’ve also been investing 10% of my salary in the company stock purchase plan, as I have been since the plan was initiated. I’m happy to continuing buying into the stock market while the prices are lower than they have been in the past few years, I’m hoping that I’m giving myself enough time for the stocks to increase above inflation.

Published or updated December 11, 2008. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 12 comments… read them below or add one }

avatar PT

I love my Employee Stock Purchase Plan. I earned a nice 15% on it in 6 months last round. The 15% is guaranteed money, and since I flip the stock (sell, shortly after I buy) my risk is very low, and I don’t have too much invested in my own company stock. It’s truly my favorite company benefit next to my 401k.

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avatar Mr. ToughMoneyLove

Unless the stock is heavily discounted or there is a significant match, investing in your employer’s stock increases your financial risk as compared to alternatives. If the company does poorly, the stock could tank and you could lose your job. If the employer’s stock is not publicly traded, the risk is even greater because management definitely will not be looking out for the interests of minority shareholders.

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avatar Luke Landes ♦127,485 (Platinum)

Mr: TML: I try to take PT’s approach by selling the company stock as soon as possible. In my case, the stock is offered at a 15% discount off the lower of the beginning of quarter or end of quarter price. I don’t think it’s worth the extra exposure to the company — in addition to the salary/benefits/job security and small required company stock purchase in the 401(k) employer matching contribution — to wait for a more favorable long-term tax treatment. That being said, I still have some company stock I’m holding on to due to the market (and my company’s stock) being down… I think it’s a bad time to sell.

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avatar Todd @ Prosperity Junky

It is interesting that people use a “stock increase” as identifier to invest more as if they have identified the bottom. In my opinion, things are on sale right now any which way you look at it. Yes it could go lower but so what if you are talking retirement investing. Yes the volatility is high but I don’t see that as a long term concern either. I believe if you have free cash that you have identified to invest, then get it into the market sooner than later.

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avatar Kevin

I came by to specifically reference the need to sell your employer stock due to the ingrained risks, but looks like you guys have covered it mostly.

My private company has a funky stock option reward, but it is based on exceedingly high performance and I don’t completely understand it. Unfortunately I haven’t earned any thus far!

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avatar Miss M

We get company stock as part of our employment, you don’t purchase it you get an annual alotment based on your salary. It’s a pretty big amount, I was shocked when I got my first statement. The company is employee owned, so that is your ownership share. But since it’s not public you can’t sell your stock. It’s a strange setup, it’s really a retirement account. To get paid out you have to be retirement age and no longer work for the company. If you roll it over into an IRA the distribution is tax free. We had a huge wave of retirements this year, the company stock price was up quite a bit. Since the stock market is down quite a bit, it was a great time for a lot of people to cash out and move the money into IRAs.

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avatar Craig

For someone new and young looking to get involved, where would you recommend starting and researching, and how to actually get in the game? Individual stocks, mutual funds, index funds?

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avatar Mike

This is great that you are contributing 50% of your salary to your 401k plan. Your “other income” is really helping you save responsibly for retirement!

I’m a little skeptical about putting too much money into company stock purchase plans, unless the employee gets a significant discount on the purchase price. Look at all of the individuals in this country who have lost significant amounts of their retirement plans due to having too much of their retirement portfolio in their own company’s stock. Case in point – ENRON.

You should definitely purchase company stock, especially at a purchase discount, but each individual should ensure that one company doesn’t encompass too much of his/her overall portfolio.

Great work, look forward to reading more.

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avatar Bill M

The company I work for used to have all the goodies, stock options, matching, since the economy turned around everything is gone also. We were just notified that no more matching until economy recovers, options are on hold for only top performing.

@Craig – I would start with ETFs that track indexes, its a good way to start with a small amount of money, remember what will win is consistency.

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avatar David

Congratulations on maxing out your 401K, and good thinking with selling your employee stock.

I agree now is the perfect time to invest more in stocks…I’m planning on opening an IRA soon.

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avatar Generation Millionaire

If we follow history – then increasing ayour contributions now is a good idea. We never know if we are really at the bottom of the bear market but dollar cost averaging in over time – historically has provided the best returns – in a well allocated portfolio. Rule of thumb with stock options – make sure not to over weight your portfolio with any individual stock. Remember Enron, World Com and Lehmans.

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avatar Craig

@bill Thanks for the tip. Any place you recommend reading basic info about it?

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