My dumbest investment turns out to be not so much what I bought, but what I didn’t sell. Just out of university, I joined a start-up tech company in the go-go days of the late nineties. It was a good time to be an engineer. Companies held BBQs to hire software developers and gave away PT-Cruisers just for applying for a job. Employers gave out stock options and bonuses like drunken sailors just to keep people from leaving. On-site massages were a common employee perk.
A high-flying, NASDAQ-listed, high-octane tech outfit bought out the start-up company I was working with. The value of my vested stock options was an incredible 70% of my net worth. In hindsight, I should have sold all my options as soon as I was eligible to sell. I didn’t know a thing about how the stock market worked then (my wife says I still don’t!) and was dreaming about the millions my options were going to be worth in the future.
I did think about selling but I was worried about the wrong things. I was worried about the taxes I would be on hook for and worried about how much of an idiot I would be if I sell and the stock rockets from there.
You can easily guess how this story ends. A year or so later, my employer severely disappointed Wall Street expectations and the stock tanked spectacularly. A few months and a lot of internal turmoil later, my employer was acquired by a much bigger fish. The new company restructured operations by laying-off a significant chunk of the workforce, including yours truly.
Now, a couple of years later, I am (hopefully) much wiser for the experience. I consider my experience a very expensive education:
- Never tie-up any more of your financial future with that of your employer than necessary
- Never have too much riding on one stock
- Consider buying and selling a stock strictly on its merits, not tax issues
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4 responses so far ↓
1 Big Cajun Man // Apr 21, 2005 at 2:14 pm
Amen brother, potential is great if you are an ELECTRON but that is about it. If your options are worth ANYTHING, SELL! A bird in the hand “shat in my corn flakes”, as we say at the former largest High Tech Company in Ottawa
2 Canadian Capitalist // Apr 22, 2005 at 8:54 am
Thanks for stopping by. Well, I’ve learnt my lesson. Fool me once…
Cheers!
3 Caitlin // Sep 17, 2005 at 11:26 am
boy does this sound familiar! My first tech job after getting my graduate degree did an IPO. This wasn’t a “hot internet” co, so the scale was smaller…but when some options vested, I cashed in a chunk but left the rest as options in an attempt to be a “fiscally responsible adult”.
Why I didn’t think that cashing them all in and investing them in a more stable and accessible way would also fit that criteria escapes me to this day
The hook at my company is that they took so long to do (some would say a little cooking took place) the books that the non-blackout period for selling was usually the last THREE weeks of each QUARTER. UGH.
So a lot of folks (me included) would hold and wait for the rare convergence of a “good” price and non-blackout period.
By the time I left…most of my options were under water. I didnt have faith in the leadership to make the rest of them worth anything in the future so I left them.
but I left them to join a company that did have onsite massages
(15 mins in the chair during high stress times…it was a nice perk and didnt cost the company much. THOSE were good times)
4 Top Three Investing Mistakes // Apr 13, 2008 at 11:17 pm
[...] share of mistakes and have frequently blogged about them. Regular readers know of blunders such as having too much tied up in employer stock or buying into labour-sponsored funds for the “tax savings”. Still, it wasn’t [...]
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