Overexposed to Company Stock? Don’t Make These Mistakes!

In the early 2000s, Enron employees had 62% of their 401(k) assets invested in Enron stock. When the company collapsed, many employees lost both their jobs and a significant portion of their retirement savings. Welcome to Fundamentals of Investing, a show where we cover some of the topics you need to understand as a high net worth investor. To make the most of your wealth. I'm Brian Dress, Director of Research here at Left Brain, joined as always by our CEO and Chief Investment Officer, Nolan Langford. Nolan, welcome to the program.

Thank you, Brian. Man, did you pick a really important topic and one that's going to be really important for the viewers, especially if they're holding company stock.

That's right. Today we're talking about the hidden risks of holding too much company stock. And who is this for? This is for executives, tech professionals, and other high income earners. That work at a company with a publicly traded stock where a lot of their compensation comes from company stock. And there are a handful of others who work at privately held companies with a similar issue. But today we're going to talk about a number of different topics. We're going to talk about restricted stock units, RSUs. We're going to talk about options. We're going to talk about 401(k) stock, ESPPs, tax consequences, emotional biases, and diversification. So, Nolan, quite a bit to cover here. But we're going to start here, Nolan. You've got decades of experience working with these professionals. Do you have any stories of concentration that stick in your mind over the, over the years?

Yes, Ryan. I think if we go back to like the last tech bubble, right, the last tech boom, I should say.

Right.

Which went from 1995 to 2000. We're sitting there at the top of 2000 and there was a lot of investors or investors I remember coming in as clients When the market started to actually go down, it created a huge cascading effect on these executives psychologically. Right. I think the run-up— if you go back and look at the charts of a lot of tech stocks and growth stocks from 1995 to 2000, you're going to see that huge bull market. And if you're an executive and you're sitting there and you got these company stocks and let's say they're $1 million, right, you know, halfway through the bull market, at the end of it, if they're $2, $3 million, Um, that's really significant. So I think emotionally that can have an impact. The bigger impact, you know, so I think you had that euphoria in the run-up, right? Then on the way down, I think psychologically a lot of people got hurt, right, trying to think about when is a good time to leave the party, uh, if any time's a good time. So yes, uh, in the tech boom, we see a lot of investors on that way down really get tripped up. You know, the stock was $25 It went up to $200. Clients are euphoric, right? Then it gets halved. It knocks down from $200 to $100. And then you get to that emotional roller coaster. That was the last time I saw it en masse.

So I want to talk— this is a great time to talk about this, Nolan, because we're in the midst of another boom here in tech, specifically in AI, but in a number of other areas, cybersecurity being one of them, digital transformation, digital advertising, quite a few different areas of tech. And other areas that are doing really well. So we want to talk about what's the strategy to handle these stocks when they're doing well. And let's not wait until they start to collapse if that's what happens, if there's a repeat of 2000 and try to make decisions when the bullets are flying. So that's why we wanted to talk to you all about this today. So we're going to start right out with the types of company stock vehicles. There's a lot of different ways to own stock in the company with which you work. And also we want to remember you're drawing a paycheck from that company as well as being exposed to their stock. So that may or may not be a problem. We want to talk through all the different areas where you might own stock as an employee. So first of all, holding stock in a retirement plan, there are risks, there are liquidity issues, there's diversification. So let's talk about holding employee stock in a 401(k) first, Nolan. So this is the vehicle that most people have at their employer. What are some of the risks of holding company stock in your 401(k)?

This is a really good question because everybody that works for a publicly traded company, nearly everybody, will have the ability to invest in company stock through their 401(k). It's very rare we run across a publicly traded company that doesn't allow that as an investment option. Now, the biggest risk that we used to see with investing in the company stock is the overconcentration. You know, you mentioned Enron earlier in the show, and if you go back, it wasn't just Enron. No, you know, it was a lot of these companies you know, Lucent, uh, Motorola, a lot of these companies that— Cisco, a lot of these companies that did really well. Company, uh, you know, if you're contributing in this company stock, you could have easily filed yourself 30, 40, 50% of your assets. I've seen it in publicly traded company stock in your 401(k). Since then, the rules have changed. Most companies now limit that number to about 10%, most of the companies that I've seen, right? So I think the big overconcentration specifically through the 401(k) is probably less of a risk these days. But I tell you what is a big risk is that you work for a company that has a bad stock. That's the bigger risk, because now I put my money in here and the company doesn't perform. And you— what comes to mind is I have a client that, um, worked for Polaris, the big snowmobile and ATV company, um, based up north there. And the stock hasn't performed well at all, and they've owned it for a very, very long time. And so it's not only that the stock didn't perform, it's also the opportunity cost because I had my money stuck here and I could have owned something else. Sure. So I think if you own— if you work for a company, I think you have to be very— you have to do an independent evaluation and say, okay, well, you know, if I didn't work here, is this a company whose stock I would buy? Right. We have a lot of clients at the firm. So just think of like a couple of Fortune 100 companies that come to mind. We have clients here at the firm that work for Pepsi. And if you think about Pepsi, it's a household brand name, but the stock hasn't performed right, like it's been well over a decade. And so that really can hurt you. So I think the biggest risk that investors face with company stock in a 401(k) is if you have a company stock that's just not performing. Okay.

And then on the other side, there are some opportunities with owning some stock in a 401(k), Nolan, and this is one that you've put to use over the years. Net unrealized appreciation, NUA. This is a tax strategy that is available to folks that have company stock in their 401(k). We could do a whole video on NUA for sure, but, you know, kind of 30 to 60 seconds, what do you, you know, how would you explain NUA in a nutshell?

Well, I think the, uh, the IRS kind of— I don't want to say they gave us a freebie, uh, but there's certainly some incentive to own company stock in a 401(k) plan. And the incentive is, in the tax code, there's something written called net unrealized appreciation. The layman's, uh, interpretation of that is, if you own company stock in the 401(k), between now and retirement, if the company stock goes up, then you get a tax break. Okay, if it goes up a lot, the tax rate— the tax break could be big. Okay. And that's basically what NUA is. You need to own company stock, has to be in the 401(k) plan. Generally, it needs to be left there for a while because it has to be, you know, you want to be at least age 55.

All right.

But once you get to 55 and you leave the company or separate from service, you do have the ability to go into that 401(k), distribute the stock, not move it to another IRA where you can be further trapped with rules. But you can actually move it to like a bank brokerage type of account. So now you have liquidity, and if the stock's going up, you're going to have a really sweet tax kiss because the NUA rules say I get taxed at the lower of the current market value or my cost basis as ordinary income. Okay. And anything on top of that is capital gain. And as we know, most of the high-income earners are going to have a much lower capital gain rate than they are going to have an ordinary income rate, which could be as high as 37%.

Yeah.

But on the capital gain rate, you know, even if they made made millions of dollars, that higher number is 20%. And most of the people we see, they're in that 15% bracket.

Excellent. So if you're in this situation, we'd love to talk to you a little bit more about NUA if that's something you're not familiar with. Now, something that people might be more familiar with are ESPPs, Nolan. These are employee stock purchase plans. A couple of questions that come up with ESPPs. A, should you participate? So let's handle that one first.

I want to say for most people, uh, the answer is going to be yes, but it won't be universal. An employee stock purchase plan, um, for all of the viewers, basically I can take some money out of each paycheck and I can direct that money to buy my own company shares. And generally most companies will administer the plan. There's no cost to participate. The money comes right out of the top. Uh, there's two things you want to pay attention— there's a few things. One of them is, is the company giving me an incentive to buy the stock, right? And if so, if the incentive's big enough, it's probably going to be worth me taking a look. Generally, what we've seen at the stingy end of corporations, it's corporations will let you buy into the company stock periodically. They won't charge you a fee for doing it, but they also won't give you a discount. And that's on the stingier side, right? On a more gracious or generous side, we've seen companies— there's one company that we're working with, we have an executive. The company, it's a 15% discount on the company's stocks. Stocks trading at $100, I get to buy it at $85. Sure, it's a 15% discount. So you want to pay attention to how big a discount you get and then also how often the company is buying the stock. So for example, they'll take it out of my paycheck each pay period, where for most people in America, it's twice a month. Okay, and then it's how often are they buying it. Sometimes it's monthly, sometimes it's every paycheck, sometimes it's once a month, sometimes it's once a quarter, sometimes it's semiannual. So you have to really pay attention because these rules can make a difference. There's one company that we're looking at, it's a publicly traded company, we have an executive there, nice discount, 15%, um, and they will buy the stock quarterly. And what I like, so they take all this money out every 2 weeks out of the paycheck, right? Then there's a quarterly look back. So they go back and look, and they take a look at the average closing price, okay? And that's the price that you buy the stock at, okay? So in some cases, you can win twice. You can win with the 50— with the discount, whatever that they're giving you. And if there's a look back, you know, if the stock's trading at 100 but the average price has been 92 or something, then I'll also get, um, a benefit, okay? Money already. So a lot of ways to win with these plans if you buy stock from a company that's prosperous.

Right. So I guess that brings me to the next question on ESPP. So a lot of people do buy stock because there's a discount there and they want to take advantage of that 5%, 10%, 15% discount, whatever the case may be. So I think I sort of know the answer to this, but if some people have thought, should I hold the stock or should I sell it right away and take advantage and capture that discount? How do you think about about how to answer that question.

So that's going to depend, and that will be right for every person. Sure, it's going to be different for every person. Even if they have the same— they're the same age, they have the same income, uh, the answer still might be different for each person. So what Brian's saying, uh, for all the viewers, is if my plan buys the stock for me quarterly, at the end of each quarter, let's imagine that they purchased $5,000 or $10,000 in shares. So as that quarter ends and those shares hit my account, I get to decide whether I want to hold them or whether I'd like to sell them. Right. And again, it's going to depend on a lot— your tax situation, your age, your risk tolerance, how much stock you already have, how the company's performing. Yep. What the outlook is. So there's no easy answer there. For anybody that has an advisor, I would suggest that they sit down with their advisor and take a look at scenario planning. For any of our clients or anybody that's a prospective client or kicking the tires on our firm, certainly we'd be happy to have that discussion.

Absolutely. This is something we deal with on a daily basis and we'd be happy to help. Third type of company stock vehicles is RSUs. Nolan, that's restricted stock units. Talk a little bit about those.

Oh, these tricky restricted stock units. They were born out of the early 2000s. You know, if you remember, if you go back to the early 2000s, most company executives received stock options, which I know we'll talk about later, and qualified in the setup stock. So we were talking earlier about, hey, you know, how has this company stock owning or over-concentration in company stocks— what have you seen happen? What we didn't talk about is how they had concentration. So in the early 2000s, a lot of people got these stock options. For them, executives receiving them, they looked like free money. Right. Because all you're doing is working at the corporation, you're doing your job. Then they have these comp plans where part of your comp, they will just give you some shares and then they vest and then you go about doing it. Well, those were replaced. The tax rules changed in the early 2000s. Companies had to expense stock options. So out went the options and in came another security that you can comp your executives with. Hence the restricted stock units.

Okay.

So what they are is actual shares of stock companies grant them to me today, but they're not vested the day they give them to me. I have to earn them over time.

Okay.

And the most common vesting schedule is 3 years. We see some 3 or some 4. The most common one, uh, is 3 years. So this year, the company grants me 100 shares of stock, Company ABC, but I can't go out and sell them this year, right? In year number— after year number 1, A third of those shares will vest, or about 33 1/3 shares.

Okay.

Then I can sell them. After year number 2, another third. And after the third year, 100— all 100 shares are vested, and I could sell them all if I haven't already. Okay. So in essence, the employee's restricted stock in this— the company's granting me shares of stock. Once they vest, I own them.

Perfect. So when you're— when you hear the term vesting, just remember you're earning the access to those over time. So that's restricted stock units. What should investors do when those stocks vest over time? What is the next step or the next move?

So very similar to what we said about the employee stock purchase plan, it depends. Okay. So restricted stock units, they're going to vest. And remember, when they vest, they get my 1040 as ordinary income.

Okay.

So my example, it was 100 shares that were granted to me today. So no dollar amount will hit my W-2 or my 1040 this year just because those shares were, were given to me or put into my account. Right. Because they haven't vested. But next year, one-third of those shares are going to vest. So 33 and one-third shares, they're worth $100. It's $3,300 approximately is what it's going to be when it—

that's right, to your taxes.

So I'm going to need to decide next year this money is going to be hitting my taxes. So now these shares, these $33 and a third, I need to make a decision. I just want to pay the taxes out of cash and leave the shares alone. Or do I want to think about making a move with these shares, not only to offset the taxes, but to decrease my position in the company?

Yes.

Okay. Each investor will need to make that decision quarterly, probably too often. But definitely at least annually, as you've accumulated these shares, they should be reviewed.

So you're going to be kind of vesting once a year. You're going to be having some shares hit the account. So you should think about what to do each time, each year that that comes around. The last one, Nolan, we've talked about RSUs, we've talked about ESPP and 401(k). This is less commonplace than it used to be. As you said, there were some tax rules that changed. We don't need to go into that. Stock options. What are the tax implications of stock options there?

Yeah, I would just say stock options these days are a lot more complex. Fewer executives get them. So really be careful. The easiest or the simplest type to get are just non-qualified stock options. So stocks are— the stock options are granted to me. Generally, they're going to give me the opportunity to buy the stock at some point in the future.

Right.

Usually between now and 10 years.

Okay.

At some predefined price. All right. So my stock today is $30. Usually options are granted not too far from today's price, right? Granted, they were issued at $30. The vesting could be a 4-year vest when I own all the shares, and then they expire at the end of 2 years.

Okay.

It gives me exposure to the stock. I did not pay for it. But in every case with stock options, I need the stock to go up Once it goes up and I'm vested, I then will need to decide what I need to do. And here it's a little bit more complex because there is a tax issue, both an ordinary tax issue and a capital gain issue. So if any listeners are sitting here and you're probably in the C-suite these days, if you have non-qualified or incentive stock options, you certainly should be working with a professional. We're happy to help. We offer a no-cost, no-obligation consultation. But these can be very lucrative, but they also can have a big impact from an income tax standpoint. And if you're in retirement and these were part of your retirement package and you're thinking about vesting or exercising and selling in retirement, yeah, be really, really careful because it can affect your IRMAA, your tax rate, other things that you're doing. So you have to be really careful with these stock options. Okay.

So those are the kind of the 4 areas where we see stock owned in company stock. But let's talk about some of the considerations in terms of making decisions around all this. So the first one is taxes, of course. So you've got to think about the timing of your tax events. Nolan mentioned vesting, exercising options, selling your stock. All those things are taxable events. Then you got to think about short-term and long-term capital gains. So short-term capital gains is 365 days or less of holding something, or long-term gains is 1 year plus 1 day. So that's something else. And those things have different— you're taxed at different rates for that. Nolan, tell me what you think, how you think about taxes, because we do investments, but we also do some tax planning around here. How do you think about taxes when you consider company stock for clients?

So the first thing we would suggest for every viewer and everybody that's in these situations, we suggest everybody have a CPA. Sure. Somebody that prepares their taxes, somebody they can go to, a good counselor. Just wanted to remind all of the viewers, we're not accountants, and so this should not be considered tax advice.

Correct.

There certainly are some things to think about with taxes. So you mentioned the first one, short-term gains versus long-term gains. Right. And the cutoff is 365 days. I would say investors and employees certainly want to be careful with restricted stock, the stock options, all those company plans. Because if you're off, you know, even a couple of days or a month or something, it can make a really big impact.

Absolutely.

As you know, there's certain strategies that we use here. You know, at the end of the year, we want to do capital gain, cap loss harvesting. There's other things that you can do if you own company stock and maybe you're close, you're not at a window yet where you can sell. Or if you have a loss in the company stock, you may want to buy back and then wait 30 days and then sell the stock. So there's certainly some things that you can do. Taxes should be certainly a big part of the discussion. And again, we suggest people meet with their advisors, their financial advisors and their accountants, because if you do have these stock options and you have a lot of them, chances are that there are some embedded tax consequences. Right. So I would just say be, be really careful.

Okay, so that's taxes. That's something you definitely need to consider with your financial advisor and your accountant. Let's talk about behavioral risks and emotional bias. So this is something that comes up all the time. You know, people work at these companies and they've got an emotional attachment to these companies. So, you know, they're unlikely to want to sell the stock because there's an emotional attachment there, Nolan. There's loyalty bias. There's what we call the endowment effect. So when you own something, you consider it to have a higher value than it might actually have in actual fact. And then there's something called FOMO. We all know that word in just general parlance, but the fear of missing out. So, a lot of people think, "Okay, well, if I sell my stock and then it goes higher, I'm going to feel really awful about that decision." Okay. How do you deal with those types of risks that seem to come into play when we're talking about company stock and owning our own company stock?

Yeah. So, this is all behavior modification.

Right.

It's really hard. You're right. Because if you're a hard-charging, successful executive, those are the people that we're speaking to. Those are who our clients are. Then you're pretty much all in on your company.

Mm-hmm.

Yeah. You know, it bleeds through your bloodstream and you can feel it. And so it's really hard to separate the investment part, right, from my love of, my dedication to, my affinity for. Yes, but what I'm saying, telling investors, you must do that. You need an independent person with no emotional attachment to tell you if your company is a good investment or not.

That's right.

Because you are a bad judge of that.

That's right.

Because you're in the corporate meetings, you know, well, we got this new product coming out and everybody's rooting against us, so it's us against the world. Yeah, you don't understand how high— well, you don't— you know what I mean? So you have the inside view. We certainly appreciate that. But then there's an outside view, and generally what an investor's thinking about when they own the company stock is they're thinking about that stock and that company, but they're not thinking about the other 4,000 stocks they could own if their money wasn't all tied up in this one. So yes, we do think for most clients working for a lot of these corporations, the ones that we've seen, uh, the companies that are excelling, that are doing very well that are strategically positioned right, they should have some exposure to the stock. It's probably going to make them a better employee and probably make some sense. The question is at what level and that, you know, and how do you sort of manage that going forward? Right.

And you got to think, you sort of touched on this, the opportunity cost of remaining in that stock. So maybe you're in a company that's growing sort of well, but there are other opportunities out there in the market that are, you know, companies that are growing phenomenally well. So if you stay in your company's stock exclusively, you may miss those opportunities. So that's something you want to consider.

Well, okay, situation— I agree with you. And, uh, you know, to put a little real life on it, so think about if you're an executive, Brian, today at one of the food companies or one of the consumer staple companies.

Sure.

So, um, I don't want to name any names, but one of the grocery store companies, right? We know that they've been struggling. With the advent of GLP-1, the weight loss drugs.

That's right.

And the Maha movement— Make America Healthy Again. People are certainly paying attention to what they're putting in their shopping carts. Yeah, certainly paying attention to what they're putting in their stomach. So I think a lot of these stocks are challenged. So if you're an executive and you work for one of these big industrial food companies or you work for one of these consumer staple packaged goods companies, your stock hasn't performed. And it's been like 5, 5 years plus or 10 years plus, then you have to look at yourself. You probably, by having to keep maintaining exposure to that stock, you've cost yourself and your family— if you're looking at your family net worth and your family fortune, you certainly, you know, cost yourself some dollars, right? Hopefully they haven't added up to zeros and commas, but they certainly have affected your net worth. And so you need an independent investment person to look at your entire portfolio and say, if you didn't work there and this company hasn't performed and the outlook isn't great, should you have X percent of your net worth in that company stock? And each person is going to have to answer that for him or herself.

Yeah, and I think another thing that often happens is, you know, maybe a stock will get to a high watermark of a certain price and then that stock pulls back that they own, the company stock, and they're just hoping and waiting and anchoring for that stock to get back to that price. Meanwhile, other things are growing at the same time and you're missing out on that opportunity. So that's something we want to definitely caution everybody against, you know, that anchoring bias. So what we do here as advisors is help our clients combat these emotional and behavioral biases. And it's very difficult when you're in the middle of the situation to do so. So that's what we do here. Let's talk about another issue, which is concentration and liquidity, Nolan. So here when we do investing for folks, we don't really want to own more than 10% or 15% of anybody's portfolio in any given stock. And I'm assuming that's pretty similar when we're talking about company stock, despite the fact that someone may work there. And then also, if the company that you work for is pre-IPO or the stock's not tradable, then you have a liquidity problem too. You can't really go out and sell stock at any moment that you want to. So how do you think about, you know, with the clients that we have, overconcentration and illiquidity as impediments to sort of optimizing our portfolio when we're talking about company stock?

Every investor has to pay attention to both of those things. You know, hey, how much money, how much of my overall net worth do I have tied up in this company stock? And if I need the cash, how accessible is it, right? So far, uh, in this recording, I was actually speaking of people that work for companies that are publicly traded.

That's right.

It's most of what we run into. But if you're one of these, uh, sorts that work for one of these private companies, uh, it could be a private equity-owned company that hasn't gone public yet, they have plans to go public in the future, Or it can just be one of the hundreds of thousands of, you know, small to midsize or large private companies that are just going to be private for forever.

Right.

With no thought of going public. And so I think my response or my action would be different depending on which one I work for. Sure. But if I'm at a company and I have company stock, but it is not liquid, meaning I cannot trade it and turn that stock into cash in the next week, then yeah, you definitely need to do more planning. Planning the plan around it. But I think even if you're an investor, Brian, and you have a concentrated position and you're in a publicly traded company, you know, it could be Nvidia, sure, just publicly traded company in the world, right? Um, and you have a concentrated stock position. I think as an executive you still have to consider what moves might I need to make. So let's say Nvidia is 20% of my net worth because I work there and I, right, participate as anything else. I think from an investment standpoint, I think the other 80% of your portfolio, you need to be careful on how you invest so you don't get a lot of overlap. I'm not sure how many more chip companies— yeah, from 20% in NVIDIA already, I'm not sure how many more chip companies I want. All right, I'm not sure how much indexing I would do either. You know, I wouldn't own the S&P or the Q's or any of those indexes. I would want to own individual portfolios. In my example, if I'm NVIDIA and 20% of my portfolio is NVIDIA, the other 80% is the S&P, That's probably another 10% of NVIDIA. So you need to be really careful if you have a concentrated stock position. And that's where you really want to work with a firm that can custom tailor a solution and not go to one of these big supermarket bulge bracket firms we hear about all the time that's eager to shove you into something that's prepackaged.

It's interesting you talk about indexing, Nolan, and this is, you know, again, another topic, but There are 7 or 8 companies in the index that are, you know, 5 or more percent of the index. And so people need to be mindful if they work at Microsoft or Google or Apple or any of these other large companies. If you own the company stock and then you own index funds outside of that, then you're adding more exposure. I know a lot of people are into passive investing and doing index investing, but that's certainly something they need to think about if they're at one of these mega, mega-cap stock, mega-cap companies, I should say. So that's overconcentration and illiquidity. We want to talk about one more thing. That's diversification strategies, Nolan. So there are quite a few different ways that people can diversify out of what they've got in this concentrated position in their stock that they— in the company that they work at. So talk to me about what do you think some of the best ways to diversify clients away from concentrations? in these types of stocks that they— and the companies that they work for? And is there a left-brain view on, on how to do this?

So again, we're back to, um, taxes and owning company stock, and you have to be very careful because it could be fraught with peril. But you're right, if you own, um, company stock in a concentrated way and the stock has done fairly well and done well, even kept up with the S&P, for example, over the last 10 years, it's very likely that some portion of your company stock is a low-cost basis. Right. You probably are sitting on capital gains and it could be significant. So in that case, you do want to be careful. You may need to diversify, but it may cost you money from paying Uncle Sam in order to do that. So you really want to be careful. So one of the things I would think about is how I own the stock. So we always do these charts called the bucket chart.

Yeah.

Which shows, you know, you can have $10 million, but it's how you own it. What's retirement? What's non-retirement? What's in the freedom bucket and what's in the tax-free bucket?

Right.

And so it depends. You talk about diversifying, you know, my company stock, you know, if it's all in my 401(k) or if I have half in my 401(k) and half in RSUs, depending on my tax bracket, where we are in the calendar and what the rest of my portfolio looks like, I can make an argument for reducing my company stock exposure through either bucket, through the brokerage bucket that's going to be taxable, or through the 401(k), which if I can reduce my exposure there, it doesn't, doesn't cost you. So depending on where you are and your situation in life and your tax bracket this year, um, you know, you could do yourself some, um, do yourself some real favors by doing it, particularly if you're one of these clients. You know, we've heard about these big Megacap companies starting to lay people off and prune their workforce, 3 to 5%, nothing drastic. Yeah, but if you're one of these employees and you have company stock and it's like mid-year and you're going to get a package, you know, mid-year, and so, um, your income is going to be changed next year because of what happened this year, or vice versa, right? So if I have a valley of a low tax year, I may want to be more aggressive with some of my stuff than have future taxes due. I may want to exercise, you know, if I'm going to be in a low tax bracket this year because of my work situation, either I retired early or I took a package. Yeah, I am. If I'm in a low tax bracket, maybe that's a year I want to realize capital gain. Sure. Back to work at my new employer at a new higher salary.

Sure.

And then the other thing I would think about is gifting. You know, we run into this a lot where our clients have done well in life. And they want to leave money to their kids, do they want to pay for kids' college and then leave some money when they're left?

Right.

Company stock can be a solution to both for a client. Yeah. So if I have a stock and, you know, it's $100,000 value today and my cost basis is $25,000, it will make some sense to think about if I want to give money to my kids, that might be a good bucket of money to think about giving them.

Appreciated stock.

Yeah. My tax bracket's at 37%. If these are working professionals that we work with, work for these publicly traded companies are tax brackets 37, the kids' tax brackets zero. So, it may make some shit, make some sense to ship some highly appreciated stocks. So, a lot of things to do, a lot of things to think about.

It's difficult to be a do-it-yourselfer out there, Nolan, because there are so many different ways to optimize things and you may have some blind spots. And so, those are the types of executives we certainly want to have a conversation with if you're trying to figure out how to make the best of what you've got, get in touch with us and we'd be happy to help. So we'll conclude here, Nolan, some key lessons that we talked about today. The types of ways that you can own the employee stock or company stock in your 401(k) and a number of different other ways. Taxes being a huge consideration, risk control. So obviously concentration, not only with the stock that you own, but also it's that you're concentrated with the paycheck. So you have, double exposure there and risk control and liquidity. So there are all things that we're thinking about when we're speaking with company executives that have publicly traded stock and how we advise them to proceed with that. So we'll ask you, we're putting together a free guide. It's called The Executive's Guide to Managing Company Stock. So we're going to have that down in the description and all on all of our social media and on our website. So So if you're interested in this topic, definitely download the guide. We're going to have some great information in there for you on how to navigate these waters. And then also book a strategy session with us. So Nolan, we were available. We'll put our calendar links down below. And if you want to talk to us about how best you can take advantage of the company stock that you've got in your compensation package, and also how that interacts with what you're taking in as a paycheck. Get in touch with us and we'd be happy to help perhaps take you on as a client and help you optimize things. So I'll leave it there. Nolan, any final thoughts as we close out this discussion?

We wish all of these executives and successful professionals a lot of success in their wealth-building journey and their wealth-building evolution. And feel free to use this as a resource.

Yes, Nolan. This has been Fundamentals of Investing. We've talked about the hidden risks of holding too much company stock. Get in touch with us if you have, uh, if you're looking for some advice on how to proceed, and we'll see you again next time on Fundamentals of Investing. Thank you so much.