Step 1: ESPP. Step 2: Diversify

05/15/2017


I have been using my ESPP to “Filter” money into my IRA. Since I like to keep an even 100 shares of company stock that I can use to sell call options on, about once per year I will be assigned the option, and instead of rolling it back in through the ESPP, I put about half of it into the IRA. It is my main goal to diversify my funds, especially since I am not doing this to get extra spending money; I want to grow my wealth through this process.

After the money is in put into the IRA, the smartest thing to do is to put it in a low-cost Vanguard fund and forget about it. Period. The second smartest thing to do is to divide the money (this single disbursement) into about 3 GOOD companies  (if you want to play some risk VS. reward) and hold them forever. Period. Please don’t trade stocks, just don’t.

If you don’t have an ESPP, then max your 401(k) and your IRA and make sure your money sits in a low-cost diversified fund. Can’t say that enough.

The performance of my company’s stock is boring; slightly up for 2 months, then slightly down for 2 months. This is excellent for my ESPP strategy. I don’t want any volatility or excitement when I am just getting a 10% head start into the market. I have been lucky over the last 2 years that every time I have sold/been assigned an option contract I have been up around 15% gain, mainly because of the premiums I take from selling call options.

Hopefully you work for a boring Fortune 500 company like I do so you can take advantage of this under-exploited benefit.

Thanks for reading. Please let me know if you have any questions and feedback!

— KEN

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