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Ask Dave

Is ESPP An A-OK Idea?

Dave has a few words of caution for Robert, who wants to get into the employee stock purchase plan.

QUESTION: Robert wants to participate in his company’s employee stock purchase plan. Does Dave recommend them as part of a retirement plan?

ANSWER: Generally I don’t, because I don’t play single stocks of any kind because they are too risky. The employee stock purchase plan gives you a discount, but the stock price can move the discount amount in 15 seconds. If you can close on it at 15% under and then sell it today, that would work. But most people hold on to this stock over an extended period of time. The thing I don’t want for someone your age is playing your employer’s stock purchase plan to get rich. You’re doing fine because you’ve got a plan, so you can participate in this. But you don’t want your retirement hopes to ride on it.