I’m going to share the hardest money lesson and regret that I had in my career but as bad as it was, some had it far worse.
The Great Financial Crisis 2008
The year was 2007 and I was hired by a company that offered me $100k worth of company stock every year as part of my compensation. I don’t recall my base salary from that year but it was probably around $200k. When I signed up in 2007, I was granted $100k in stock that would vest over a 3 year period with a triggering clause. The triggering clause was a change in control of the company so a few months into my job, the company announced that they were merging with another company and all stock grants would pay out immediately and new stock would be issued in the new (combined) company name.
I happily took my $100k in stock and subsequently and happily paid off the mortgage of my first home with this money and the company issued another $100k in stock that would vest over a 1 year period as an incentive to retain employees.
I stuck with the company for the 1 year period which brought this story into the 2008 year and I received my shares but rather than selling them, I got greedy and held onto them thinking they would double or triple in value over the next few years.
Unfortunately, by mid 2008 things were starting to fall apart and by September 2008, huge bankruptcies started making the headlines and my company stock went from $60/share to $5/share. At $5, I should have sold but I kept hoping it would recover. To add insult to injury, I was taxed on the full value of the stock that was now worth pennies on the dollar.
I only remember this story now because as I’m looking into doing tax planning for 2023 and 2024, I remember that I carry a $3000 loss carry over year over year, probably until I die from that stock. I also have some stock that will vest later this year and I intend to cash it out as soon as it vests.
Lesson Learned: Sell! Sell! Sell!
The most common advice any good financial advisor will tell you is to never concentrate more than 5 or 10 percent of your money in one stock and I ignored that rule. Ultimately, the company went bankrupt a few years later and this is where the story truly turns sad.
Don’t be the fool!
I had friends and co-workers that still worked for that company after I left and the stock did recover somewhat during that period but everyone got wiped out when the company filed Chapter 7. One of my friends had been with the company for over 10 years and lost MILLIONS of dollars. He had made the same mistake I had an never cashed any of it out thinking it would recover back to the glory days. I did try to warn him but he wouldn’t listen. He did tell me years later that he did try to sell some stock but the CEO talked him out of it by saying it would make the company look bad if senior executives were selling stock so he didn’t and then lost it all.
My humble advice to you is to sell any vested grants as soon as you can and with the S&P 500 near insane absurd levels, I think this advice is very timely. If you are stubborn like my friend then at a bare minimum, I would suggest you sell at least half of the stock but preferably 75% and gamble on the rest otherwise you might be left the fool.
