Employer Stock and RSUs: How Much of Your Wealth Should Depend on One Company?
Clement Chung
Your employer already influences your income. If a large part of your investments is also tied to its shares, one business can affect several parts of your financial life at once. That does not mean the shares are bad. It means the concentration deserves a deliberate decision. Count more than the shares in your brokerage account Include vested shares, upcoming vesting, employee share-purchase holdings and exposure through funds. Separate what you own and can sell from awards that are not yet vested. Then ask what happens if the company struggles at the same time your job becomes less secure. A plan should consider the combined effect, rather than treating salary and investments as unrelated. The Ontario Securities Commission's workplace-plan overview describes the concentration involved in employer share plans. Create a decision process before the next vesting date Work out the role you want company shares to play in your total assets. Review trading restrictions, blackout periods and tax consequences before selling. With RSUs, employment-income reporting and later gains or losses on the shares are separate questions. Confirm cost records and currency treatment with your accountant so you do not confuse sale proceeds with a second full income inclusion. An automatic “hold everything” response is still a strategy, just one that may not have been examined. Does selling mean I do not believe in the company? No. You can believe in the business and still want your retirement, home purchase and emergency reserve to depend on a broader set of outcomes. Decide how much exposure you are comfortable carrying, document the approach and review it as your employment and wealth change. Related reading: Corporate Investing in BC: Reduce Concentration Before Chasing Returns.
Your employer already influences your income. If a large part of your investments is also tied to its shares, one business can affect several parts of your financial life at once. That does not mean the shares are bad. It means the concentration deserves a deliberate decision. Count more than the shares in your brokerage account Include vested shares, upcoming vesting, employee share-purchase holdings and exposure through funds. Separate what you own and can sell from awards that are not yet vested. Then ask what happens if the company struggles at the same time your job becomes less secure. A plan should consider the combined effect, rather than treating salary and investments as unrelated. The Ontario Securities Commission's workplace-plan overview describes the concentration involved in employer share plans. Create a decision process before the next vesting date Work out the role you want company shares to play in your total assets. Review trading restrictions, blackout periods and tax consequences before selling. With RSUs, employment-income reporting and later gains or losses on the shares are separate questions. Confirm cost records and currency treatment with your accountant so you do not confuse sale proceeds with a second full income inclusion. An automatic “hold everything” response is still a strategy, just one that may not have been examined. Does selling mean I do not believe in the company? No. You can believe in the business and still want your retirement, home purchase and emergency reserve to depend on a broader set of outcomes. Decide how much exposure you are comfortable carrying, document the approach and review it as your employment and wealth change. Related reading: Corporate Investing in BC: Reduce Concentration Before Chasing Returns.