I could see an argument where, under certain circumstances (perhaps someone young, with good earnings prospects, unlikely to need to tap their portfolio for a while) x could be greater than y, if they are rational in their picks, as a means to jump-start their portfolios.
Basically, I was thinking of the approach I’ve taken with my portfolio. Since my wife and I don’t have kids, and I seem likely to make “actuary money” for as long as I want to, the portfolio is intended to be what we live off of once I do retire, and there doesn’t need to be residual value once we’re gone.
So, until we reached the point where “we have enough to live modestly on for the foreseeable future”, I stuck to broad mutual funds and ETFs. When I did hold actual company stocks, I did so only with “discretionary funds”, rather than our core investments.
We’re now working on “we have enough to live quite comfortably indefinitely”. I’m OK with putting a portion of that amount above (“enough to live modestly on”) in less-diversified assets. If they do well, great! If they tank…I’m not too concerned about being able to keep a roof over our heads and food in our bellies.
And then if you look at folks like Jeff Bezos or Warren Buffet…their level of wealth is such that it’s not necessarily irrational to hold a significant portion of their wealth in an individual company. If that stock went to $0…they’d probably still be wealthy. Their b% can be much larger than normal folks x/y/z%'s.
I work for a large established company that’s unlikely to experience a giant positive spike in stock price, like a smaller company would. As such the upside on my RSUs are much lower than the upside if I worked at a startup. So holding mine wouldn’t likely have that potential high-end payout. And since my cash bonus is also tied to the company stock price, I sell to diversify. This won’t make me uber-wealthy, but it is the less risky way.
If I worked for a startup or private company that could be sold at some point, I would likely hold the RSUs for that potential super-high upside, given I’d be okay financially if they somehow went to $0.
I would base it on income for employees who are not nearing retirement and maybe based on investment assets (including but not limited to retirement assets) for those who are close to retirement or already retired.
When you’re a young renter with student loans your net worth might be negative so net worth wouldn’t make sense. If you don’t buy stock outside of the employer stuff then your employer stock might be 100% of your investment account.
As I mentioned, I think I typically had an amount worth a little under 15% of my salary tied up in employer stock. If it was ever worth materially more than 15% it was because the stock increased in value faster than my salary.
First off, I’d like to know what companies that hire actuaries are offering RSUs. I know Amazon has a couple (they’re trying to enter the Heath Care market). I even had a mock interview with an Amazon manager (she was the mom of one of my son’s friends) about one of the positions and I could see in her face I was not Amazon material.
My ex works in tech and she didn’t touch her RSUs after they vested except for when we needed money for a down payment on a house. Then she would look at the stock price and complain about how much more money she’d have if she didn’t sell, while sitting in house it paid for with the remodeled kitchen and brand new hardwood floors. Me? Nope, not bitter at all.
Anyway, she’s terrible with money and not a good example of what you should or shouldn’t do with your RSUs.
I think for the decision of sell or hold, the RSUs and ESPPs are similar. But, otherwise, they’re very different. RSUs are something your company awards you as part of your total compensation package. ESPPs are just stock that you buy from your company at a discount with money from your base salary.
I think ESPPs are worth participating in (the one at my company is, at least, 6 month accumulation period, 15% discount of MIN(start price, end price) ). They’re just nowhere near as generous as RSUs.
Anyway, at the end of the day, if you want your company’s stock as part of your investment portfolio, by all means, hold on to it. If you just want the money, just sell now. The tax benefit isn’t that much and what are you going to do at the end of the year if the price has tanked? Take the money.
Personally, I maxed out my ESPP contribution (I recently clawed it back 6 percentage points, but that’s another story). Then I sell it right away and reinvest into a S&P 500 index fund. It’s worked out well for me so far.
I received RSUs at one point as a retention-type bonus following an acquisition. They didn’t call it that, but I’m relatively certain that’s what it was based on the 3 year vesting period.
Concentration risk matters, so do taxes, and so do constraints on trading if you come across non public information. How those three things balance out will vary person to person.
To my knowledge most large insurance companies offer RSUs to their senior employees. AIG and Cigna are two shops off the top of my head that offer RSUs to senior actuaries