{"id":352,"date":"2023-09-18T11:41:55","date_gmt":"2023-09-18T11:41:55","guid":{"rendered":"https:\/\/capitallatest.com\/?p=352"},"modified":"2023-11-19T02:47:13","modified_gmt":"2023-11-19T02:47:13","slug":"average-earnings-of-ivy-league-alumni-initially-underwhelming","status":"publish","type":"post","link":"https:\/\/capitallatest.com\/index.php\/2023\/09\/18\/average-earnings-of-ivy-league-alumni-initially-underwhelming\/","title":{"rendered":"Average Earnings of Ivy League Alumni: Initially Underwhelming"},"content":{"rendered":"

Employees at companies with 100 or more staff often receive part of their compensation in company stock. This ownership stake can create a stronger connection and sense of responsibility towards the company. It might even motivate employees to go above and beyond in their roles, fostering a deeper commitment to the company’s success.<\/p>\n

I have always received part of my compensation in company stock since starting my career in 2005. This was the case at the investment banks I worked for over 13 years and continues today, where my wife and I fully own Financial Samurai. Owning a piece of your company can indeed be fulfilling. However, company stocks vary in value and stability.<\/p>\n

Despite the positives of owning company stock, it is often prudent to sell portions of it regularly. Here are four key reasons why this strategy makes sense.<\/p>\n

    \n
  1. Risk Diversification: Your job already ties you closely to your company’s fortunes. Accumulating company stock adds to this concentration risk. If the company struggles, you could face both a declining stock value and job insecurity. Regularly selling company stock can help diversify your investment portfolio and reduce this risk.<\/li>\n
  2. Building Passive Income: Many companies, especially in the tech sector, do not pay dividends on their stocks. Selling your company stock is a way to realize its value. You can then invest the proceeds into income-generating assets like dividend stocks, REITs, bonds, or real estate. This approach helps in building a more stable and diversified source of passive income.<\/li>\n
  3. Funding Current Needs and Goals: Selling company stock can provide funds for immediate needs or life-enhancing experiences. This could include vacations, a new car, home improvements, supporting family members, or funding education. There’s value in enjoying the benefits of your labor now, rather than waiting indefinitely for stock appreciation.<\/li>\n
  4. Managing Tax Liabilities: With certain types of stock compensation like RSUs, you are taxed when the shares vest. The income is taxed at your ordinary income rate. If you don’t sell and the stock value falls, you could end up with a tax bill disproportionate to the current value of your stock. Selling shares as they vest can help manage these tax liabilities effectively.<\/li>\n<\/ol>\n

    Example: Importance of Selling Company Stock<\/strong><\/p>\n

    Consider a scenario where 1,000 RSUs vest at $100 per share, and you’re in a 35% tax bracket. That’s a tax bill of $35,000 on the $100,000 value. If the stock price falls to $35 before you sell, your stock is now worth only $35,000, but your tax liability remains $35,000. Selling immediately upon vesting can prevent such situations.<\/p>\n

    Buying Valuable Assets with Company Stock Proceeds<\/strong><\/p>\n

    If you believe in your company’s future, it’s still wise to sell some stock to invest in assets that bring immediate value, like a family home. The memories and experiences from such investments often outweigh the potential financial gains from holding onto the stock.<\/p>\n

    Assessing Your Company and Industry<\/strong><\/p>\n

    Regularly evaluate your company’s position and industry trends. Being too invested in your company’s stock without considering market dynamics can be risky. For instance, seeing the banking sector’s challenges compared to technology, I regularly sold my banking stock and eventually left to leverage technology with Financial Samurai.<\/p>\n

    Today, with the rise of AI and short-form content, it might be prudent to diversify further, even though selling a portion of Financial Samurai doesn’t seem necessary given my diversified net worth and lack of need for additional funds.<\/p>\n

    The Takeaway<\/strong><\/p>\n

    Company stock should be treated like any other high-risk asset. Regular evaluation and prudent selling can safeguard your financial health and help you take advantage of your hard work in the present.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Employees at companies with 100 or more staff often receive part of their compensation in company stock. This ownership stake can create a stronger connection and sense of responsibility towards the company. It might even motivate employees to go above and beyond in their roles, fostering a deeper commitment to the company’s success. I have […]<\/p>\n","protected":false},"author":1,"featured_media":353,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[],"class_list":["post-352","post","type-post","status-publish","format-standard","has-post-thumbnail","category-career-employment"],"_links":{"self":[{"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/posts\/352","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/comments?post=352"}],"version-history":[{"count":1,"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/posts\/352\/revisions"}],"predecessor-version":[{"id":354,"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/posts\/352\/revisions\/354"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/media\/353"}],"wp:attachment":[{"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/media?parent=352"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/categories?post=352"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/capitallatest.com\/index.php\/wp-json\/wp\/v2\/tags?post=352"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}