Last week I did something that I had never done before. I sold some of my EA stock. It wasn’t because I am in desperate need of money but it’s because I’ve learned my lesson about “employee stock purchase plan” shares.
The ESPP plan allows us to essentially buy stock at 20% less the market price twice a year. It’s a guaranteed investment so to speak, better than any savings account. The key for a guaranteed 205 minimum return is to sell it the day you get the shares. If you wait, the stock price can do anything. If it goes up, great you can then sell it for more gains. If it goes down, you’re going to make less. Should it go down less than the 20% difference, well you’re looking at losing money.
Knowing that I could guarantee a 20% if I sold immediately twice a year, I’ve been an idiot and held onto my ESPP shares since late 2006. I have three offerings that are underwater right now. For the last offering which just completed at the end of February, I decided to show myself I had learned a lesson. I sold the shares immediately to get my nomimal 20% return.
Had I done that the previous years, I’d be better off now. As it stands, I’ll be selling right away until the economy rights itself.
For all of you who also participate in ESPP in your own company, go for the sure thing right now!