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About seeing the future: one advantage that employees have over investors is the ability to see the future in terms which products are in the pipeline. One oth

by TomVDB 8y ago

About seeing the future: one advantage that employees have over investors is the ability to see the future in terms which products are in the pipeline. One other reason to hold on to stock instead of selling are taxes: in the case of ESPP, holding on for a year (or sometimes more), it can make a huge difference in the case of heavily appreciated stock.

JohnJamesRambo 8y ago
But they can’t see what is in the future pipelines of competitors or other sectors. That’s where diversification comes in. Picking one stock does not work and has never worked. Just because someone is a dev doesn’t mean they can see the future.
- notyourwork 8y ago
  Nor can competition see into their competitors pipeline. This is why investments are a bet just like rolling dice in Vegas. A person has to decide their level of risk tolerance which depends on generally where they are at in life (how far/close to retirement) along with unique attributes of their own current financial situation (how much/little debt, how many/few dependencies, how they want to live their life).
- TomVDB 8y ago
  It doesn’t matter whether or not an employee can look into the future of a different company: he still has the advantage over others by knowing the roadmap of his own company.
muzz 8y ago
If this were a material advantage, it would probably be considered insider trading.
- alasdair_ 8y ago
  Material knowledge is one reason why the optimal RSU strategy is to set up a 10b5-1 (https://www.investopedia.com/terms/r/rule-10b5-1.asp https://www.investopedia.com/terms/r/rule-10b5-1.asp) election to sell everything as it vests, then to cancel the election right before it triggers if your material insider knowledge tells you that the next quarter is going to beat market expectations. Completely legal but obviously ethically dubious.
- TomVDB 8y ago
  I agree that it could be considered insider trading, but the SEC clearly does not, which is all that matters. It’s simply undeniable that employees know more than others. And it’s unrealistic to think that none of knowledge would ever be helpful to better predict the stock price.
defap 8y ago
Yes for ESPP but no for RSUs, which is what folks are talking about here. Selling RSUs when they vest incurs $0 capital gains.
- jmalicki 8y ago
  For an ESPP, the discount you get from the share price is also considered wages not capital gains (in fact shows up on your W-2 !)
  - TomVDB 8y ago
    That’s only true for the guaranteed discount on the lock-in price (0-20% depending on the company.) For a stock with lots of appreciation, the real bonus is in the stock price appreciation in the 2 year during which the price is locked in. That part gets taxed at capital gains if you hold the stock long enough. https://www.mystockoptions.com/content/how-long-must-i-hold-shares-purchased-under-section-423-espp-to-receive-favorable-tax-treatment https://www.mystockoptions.com/content/how-long-must-i-hold-...

by TomVDB 8y ago

JohnJamesRambo 8y ago

But they can’t see what is in the future pipelines of competitors or other sectors. That’s where diversification comes in. Picking one stock does not work and has never worked. Just because someone is a dev doesn’t mean they can see the future.

notyourwork 8y ago
Nor can competition see into their competitors pipeline. This is why investments are a bet just like rolling dice in Vegas. A person has to decide their level of risk tolerance which depends on generally where they are at in life (how far/close to retirement) along with unique attributes of their own current financial situation (how much/little debt, how many/few dependencies, how they want to live their life).
TomVDB 8y ago
It doesn’t matter whether or not an employee can look into the future of a different company: he still has the advantage over others by knowing the roadmap of his own company.

muzz 8y ago

If this were a material advantage, it would probably be considered insider trading.

alasdair_ 8y ago
Material knowledge is one reason why the optimal RSU strategy is to set up a 10b5-1 (https://www.investopedia.com/terms/r/rule-10b5-1.asp https://www.investopedia.com/terms/r/rule-10b5-1.asp) election to sell everything as it vests, then to cancel the election right before it triggers if your material insider knowledge tells you that the next quarter is going to beat market expectations. Completely legal but obviously ethically dubious.
TomVDB 8y ago
I agree that it could be considered insider trading, but the SEC clearly does not, which is all that matters. It’s simply undeniable that employees know more than others. And it’s unrealistic to think that none of knowledge would ever be helpful to better predict the stock price.

defap 8y ago

Yes for ESPP but no for RSUs, which is what folks are talking about here. Selling RSUs when they vest incurs $0 capital gains.

jmalicki 8y ago
For an ESPP, the discount you get from the share price is also considered wages not capital gains (in fact shows up on your W-2 !)
- TomVDB 8y ago
  That’s only true for the guaranteed discount on the lock-in price (0-20% depending on the company.) For a stock with lots of appreciation, the real bonus is in the stock price appreciation in the 2 year during which the price is locked in. That part gets taxed at capital gains if you hold the stock long enough. https://www.mystockoptions.com/content/how-long-must-i-hold-shares-purchased-under-section-423-espp-to-receive-favorable-tax-treatment https://www.mystockoptions.com/content/how-long-must-i-hold-...