Work Bonus Scheme

Dempsey

My company has a bonus scheme and with all the ins & outs in terms of calculating it, realistically i'm looking at it being +15% of my base salary so its its a nice chunk of change.

Every 6 months, you get a decision to make, cash it out or invest in the company shares for 3 years. Cash out, you pay paye, prsi & usc. Invest, you just pay the prsi and usc. Thats tax relief at 40% avoided. After 3 years i'll only have to pay CGT on profits above the threshold. I can also forego salary up to 7.5% to match the number of shares bought with the bonus, again avoiding paye.

On the face of it, it seems like a no brainer but since 2009, the share price has risen almost 6x and 36% YTD. Feels like a market correction will come along anytime soon and wipe out my investment. What metrics should I be looking at to be making a more informed decision about investing a sizeable amount of money into one stock?

Jim2007

Dempsey wrote: »

What metrics should I be looking at to be making a more informed decision about investing a sizeable amount of money into one stock?

When you find out, please let the rest of us know....

There is no way to reach a safe conclusion on such an issue. It is clear that concentrating your money in a single share is generally a high risk strategy. On the other hand you have better information about the particular company you are investing in than most, so your risk would not be as great as in normal situations.

dickface

It is especially risky when it is the stock of the company you work for...

Dempsey

Jim2007 wrote: »

When you find out, please let the rest of us know....

There is no way to reach a safe conclusion on such an issue. It is clear that concentrating your money in a single share is generally a high risk strategy. On the other hand you have better information about the particular company you are investing in than most, so your risk would not be as great as in normal situations.

I know there is nothing certain but there must be some way of making a risk assessment for the short/medium term?

dickface wrote: »

It is especially risky when it is the stock of the company you work for...

Why is there added risk in that?

The J Stands for Jay

Dempsey wrote: »

I know there is nothing certain but there must be some way of making a risk assessment for the short/medium term?



Why is there added risk in that?

Concentration of risk. If it tanks, you could lose your investment and your source of income at the same time.

iebamm2580

The shares would have to drop 40% over the 3 years to lose any money, i think its a no brainer to buy them.

kaymin

Generally a portfolio comprising 20 different stocks is considered diversified but personally I prefer greater diversification than that.

phantom_lord

Could you get a CfD for 3 years to hedge out the risk? Probably not worth it?

beauf

iebamm2580 wrote: »

The shares would have to drop 40% over the 3 years to lose any money, i think its a no brainer to buy them.

I was with a company once where the shares went from $60 to about $5 while I was on holidays. Luckily I'd sold out everything just before hand as I was leaving it. Lots of people hadn't. That said it recovered to about €30 over the next 5yrs, I stopped tracking it after that.

iebamm2580

beauf wrote: »

I was with a company once where the shares went from $60 to about $5 while I was on holidays. Luckily I'd sold out everything just before hand as I was leaving it. Lots of people hadn't. That said it recovered to about €30 over the next 5yrs, I stopped tracking it after that.

Possible but unlikely to drop that much in most cases, depends on the industry you are in too i suppose.

Jim2007

iebamm2580 wrote: »

The shares would have to drop 40% over the 3 years to lose any money, i think its a no brainer to buy them.

GE dropped almost 60% in about 4 years... and you know noting about the company the OP is investing in, so no it most definitely is not a no brainer, at least not for anyone here.

iebamm2580

As i said above depends on the industry too, chances are they wont drop 40% as most that do these share schemes are big multinationals, this is just simple stats.

TooOldBoots

I used to work for one of those multinationals. For years I put my Bonus payments into shares on top of which Revenue also allowed me to forgo an equal amount of my salary ontop to buy more shares. .
A lot of the people didn't go for the shares and instead took the money and paid the taxes. We were laid off a few years ago, I still have the shares and after nearly 25 years since the shares are now worth close to half a million Euro and paying a handsome dividend.
Its like this, if the company has enough faith in you to employ you, then surly you could have enough faith in them to buy the shares.
Yes there's a chance you could loose but you could also do well. I have 2 relations that worked for Apple, both as thick as stones yet they were able to clear their mortgages with the shares they earned.

I used to work for a multinational whose share price at the peak was about $100 each which eventually went bankrupt and the share were worthless. A lot can happen over 25 years.

Donald Trump

TooOldBoots wrote: »

I used to work for one of those multinationals. For years I put my Bonus payments into shares on top of which Revenue also allowed me to forgo an equal amount of my salary ontop to buy more shares. .
A lot of the people didn't go for the shares and instead took the money and paid the taxes. We were laid off a few years ago, I still have the shares and after nearly 25 years since the shares are now worth close to half a million Euro and paying a handsome dividend.
Its like this, if the company has enough faith in you to employ you, then surly you could have enough faith in them to buy the shares.
Yes there's a chance you could loose but you could also do well. I have 2 relations that worked for Apple, both as thick as stones yet they were able to clear their mortgages with the shares they earned.

If I was offered this kind of a scheme by an employer or potential employer, I'd just have to explain that I wouldn't buy shares in any company that was stupid enough to give me a job in the first place :pac:

Donald Trump

Dempsey wrote: »

My company has a bonus scheme and with all the ins & outs in terms of calculating it, realistically i'm looking at it being +15% of my base salary so its its a nice chunk of change.

Every 6 months, you get a decision to make, cash it out or invest in the company shares for 3 years. Cash out, you pay paye, prsi & usc. Invest, you just pay the prsi and usc. Thats tax relief at 40% avoided. After 3 years i'll only have to pay CGT on profits above the threshold. I can also forego salary up to 7.5% to match the number of shares bought with the bonus, again avoiding paye.

On the face of it, it seems like a no brainer but since 2009, the share price has risen almost 6x and 36% YTD. Feels like a market correction will come along anytime soon and wipe out my investment. What metrics should I be looking at to be making a more informed decision about investing a sizeable amount of money into one stock?

6X since 2009. Say 10 years. That's just under 20% YoY.



"Past performance is no guarantee of future returns" or whatever they say.


You think it's sustainable?


Also, as other poster said, huge concentration risk. Depends on what age you are. If you are not going retiring in the next few decades, take a punt if you want.

Dempsey

Its an american multinational, semiconductors

Senior Management have significant amount of shares in the company and I can see their SEC Form 4 Filings doing a quick google. Suppose I should keep an eye on what they are doing :pac: