In this video, I explain how to calculate if you have too much company stock.
Do you have too much company stock?
Hi, my name is Tom Lo from Vested Financial Planning here today to talk to you about: Do you have too much company stock? Many clients come to me and they ask me this question and the short answer is if you have more than 10 to 20% of your investable assets in your company stock, then you probably have too much. The way to calculate it is pretty straightforward.
Step one is calculate the total value of your stock. So you should include everything that you have that is vested, and you should include your Restricted Stock Units, your RSUs, your options, so Incentive Stock Options, your ISOs, your Non-qualified Stock Options, your NSOs, and anything through your Employee Stock Purchase Plan, your ESPP. So you calculate the total value. If it’s publicly traded, that’s simple, you just look at the share price. If it’s privately held, then you just take the most recent valuation and you calculate the number. You get your total value of your company stock.
Step two, calculate the total value of investable assets. So that should include everything you have that is invested and liquid. So your savings accounts, any investment accounts, brokerage accounts, stocks, bonds, mutual funds, your 401k, any other retirement accounts, you add all those up. You also add the value of your company stock, and you don’t need to include things that aren’t liquid like real estate or property. That gives you your total investable assets.
Step three is you take the total value of company stock. You divide it by the total value of investable assets and you get a percentage and that is your percent concentration in that stock. And if you are at greater than 10 to 20%, you are what financial planners call highly concentrated. And if you’re highly concentrated, then you want to think about diversifying your risk. So if you want to learn more, contact us here.
After 20 years working for companies including eBay, Yahoo!, Intuit, and startups, I made a career change into the financial world as a fee-only financial planner 9 years ago. I earned my CFP®, spent a few years at a boutique fee-only firm in San Jose, worked 2 1/2 years at a leading wealth management firm in San Francisco, and then left to build the firm I wish had existed when I was working as a tech professional.
My mission is to help other Silicon Valley professionals make the most of their employee equity to help them reach their financial goals.