What to Consider Before Investing in Your Own Company’s Stocks


You have been working for a company that provides you with a good salary, a 401k-retirement plan and numerous other perks. All told, this has been a much sweeter deal than your last gig. In fact, things have been going so well that you have been seriously considering reinvesting some of your earnings back into company stock. Before you start investing in company stock, there are a few things you might want to consider first.

How Much of an Investment Is Warranted?

As a rule, you never want to put all your eggs in one basket when investing. Successful investors live and thrive by having a diverse investment portfolio. When investing in the company you are employed at, you will want to tend away from holding too many of your own company’s stocks even if you are able to buy that company stock at a discount.

Employer Compensation

A decent perk to buying company stock is that some employers will match your 401k contribution with more company stock. This is something employers often see as a positive move, because it can build morale and improve performance of their employees by ensuring their employees benefit from the company’s well-being. Employees often see this as a good move too, because it can compel them to up their performance to improve their own financial outcome.

Read up on Your Company

When you work for a large corporation, you should be aware that these businesses must answer to higher authorities like the Securities and Exchange Commission (SEC). So, it is always a good idea for any employee holding company stock to read up on SEC filings, quarterly reports and to keep on top of the business’s financial statements. This can give an employee a heads up on where the financial and operational health of the company is heading over the short term. This in turn will help to govern how deeply invested you want to remain in the company for which you are employed.

Legal Issues

When it comes to investing in company stock, it may become necessary to speak with a securities law attorney. While this may not be the case for publicly offered stocks, the situation may become stickier in the case where an employee is holding private shares. A securities attorney may be required to ensure all the paperwork for selling such stocks is in line with SEC regulations.

When it comes to your future, it never hurts to have a strong investment portfolio to help you retire on the wealthier side of the financial spectrum. This outcome is the result of making smart investments. So, whether you are investing in company stock or some other opportunity, the important thing is that you always do your due diligence before you invest your money. In addition, it is always a good idea to have a well thought out exit strategy, because this is what ensures that you will tend to make money on your investments, rather than incurring a huge financial loss.

Anica Oaks is a professional content and copywriter who graduated from the University of San Francisco. She loves dogs, the ocean, and anything outdoor-related. You can connect with Anica on Twitter @AnicaOaks.

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