Episode Transcript
[00:00:00] Speaker A: Thank you for tuning in to Investment Insight presented by McKay Wealth Advisory. My name is Hayden Proffitt. Joining us today, we have Brent McKay. Brent, my current company is offering stock purchase at a discounted rate. Should I buy or not?
[00:00:10] Speaker B: Right. So often companies will offer, you know, discounts on the company stock to encourage, you know, you know, employers to maybe have a vested interest in the company.
So sometimes this is a good investment, sometimes it's not. Obviously you don't want to put all your retirement savings into your company stock. We saw years ago with companies like WorldCom and Enron where employees had put all their money in their company stock. The company then goes bankrupt, they then lose all the money that they had in their stock and then they lose their job too. And so one of the challenges you have with buying your company stock is you don't ever want to have more than 5% of your portfolio in one investment where you have risk. But sometimes if the company's at it, they offer a discount in exchange for doing that. So you're like, well, hey, if I buy the stock, I'm immediately making money. And so a lot of times, depending upon the plan, you may want to take the discount and then sell the stock immediately and make your 5%.
So that's an option to do it. Or if you feel like your company's in a good position and you can be unbiased looking at the finances of the company, then you can see. But we would encourage you to look at some past videos and look at how you value stocks. Take out what you know about the company and start looking at it from independent investors. Because a lot of times people feel like their company is the best run company on earth. And that doesn't necessarily mean that the stock market has rewarded that performance over the long term. So we say be careful with buying your own company stock. But it is a great opportunity in some cases and some of these plans are so liberal where you can buy it today, sell it today.
[00:01:38] Speaker A: Yeah, one thing I always look at is the mandatory holding period, if there is one. Sometimes you have to hold it for 90 days or 60 days.
So you can't just, oh, let's buy the 5%, sell it today and make 5% immediately or 10% or whatever number it is.
[00:01:52] Speaker B: But like anything, it's one of those things with an individual stock, you probably want to set a price that you want to sell it. So if you're going to buy it at this price and it gets to a certain level, at that point you want to reduce your position and look at diversification. So it does require a little bit more active care than a traditional 401k where you have a blend of stocks because you're putting all your money in one thing.
[00:02:10] Speaker A: Sure. Well, thanks for talking to us about this today and thank you for tuning in as well. Hope you have a great day.
