Should I Buy My Company Stock

A commonly asked question is if it’s a good idea to invest in one’s own company stock. It’s a risky decision which requires careful consideration, as the possible gains and losses can be significant. A few positive outcomes of investing in one’s own company stock are gaining access to company news before it becomes available to the general public, a special discount that is offered to employees, and the bragging rights of being a stakeholder in the company. Nevertheless, there are some potential negative aspects as well, such as conflict of interest, lack of diversification, and unreliable information.

Investment experts advise against investing too heavily in one’s own company stock. It is beneficial to diversify investments into different companies and markets. This is especially true if one is an employee of the company. According to the Financial Industry Regulatory Authority, employees of a publicly-held company must disclose their stock purchase, whereas those working for private companies are subject to the restrictions and policies of the company, which are usually limiting one’s stock investments. Since company stock is mostly illiquid, if one needs to sell it, it may take a long time to do so, as the market for it depends on the company performance.

Also, employees get a limited amount of insider information about the company because of their contractual obligations and company policies. Hence, their investment decisions are often based on what they see around them in the company or the rumors they hear. That is why employees must follow stringent rules when they decide to purchase their own company’s stock. The SEC requires companies to report stock purchases by corporate insiders.

Employees buying their own company’s stock should be aware that they may be taking on a higher risk. Generally speaking, investing in the stock of one’s own company is no different than investing in any other company’s stock. Nevertheless, since they have access to more information than other investors, they should be aware that having inside knowledge may place them in a slightly more privileged position. Also, their investment may be affected if the company’s performance drops.

On the other hand, organizations often offer special employee purchase plans which can be beneficial. They typically provide a discount and may require a minimum amount of time to buy or hold the shares. Moreover, companies may decide to provide their employees with stock incentives, such as stock options or other forms of equity-based compensation. Allowing employees to purchase company stock through the company’s stock purchase plan could be advantageous to those who trust their company and believe in its long-term prospects.

Tax Consequences

Employees must be aware that there are also possible tax consequences when buying company stock. Usually, when stock is purchased, there is no tax obligation before it is sold. In other words, if the individual pays for it with their own money, no income tax is due at the time of purchase. It does not matter whether it is a private or public company. However, those who buy stocks through an employee‘s stock purchase plan, may be subject to a different taxation rule. Specifically, federal and state taxes may be taken out when the stocks are purchased, which can lower the cost of stock.

It is also important to pay attention to capital gains tax when it comes time to sell the shares. If the stock has been held for less than one year, the gains will be taxed at the individual’s ordinary income tax rate. If the stock is held for more than one year, capital gains tax will be the applicable rate.


Therefore, when investing in one’s own company stock, individuals should think about the potential risks, such as lack of liquidity, possible loss of capital and limited insider information. At the same time, employees must consider the possible benefits, such as a discount on the stock price, special incentives, and inside information which is available to them. It is also important to do research on the company to ensure that it is a sound investment. After taking the above factors into account and doing the proper research, individuals should then decide if investing in their own company stock is appropriate for their individual situation.

Advantages of Company Stock

Investing in one’s own company stock can have several advantages. For one, investing in the stock of one’s own company can have a direct financial impact on the individual – any return on investment could boost their income in the long run. One can also be proud and self-motivated to work even harder since they will be part of the team contributing to the success of the firm. Moreover, having a stake in the company by owning its stock can give individuals access to the latest news, market insights and the ability to influence company decision-making.

In addition, those who are looking to benefit from stock appreciation can benefit from company stock. Not only can the stock appreciate due to the company’s increased earnings and performance, but it can also appreciate from industry developments, causing changes in stock prices of competing companies within the same industry.

Finally, when investing in one’s own company stock, not only does one benefit from the appreciation of their stock, but there are also employee benefit programs such as pension plans, 401(k)s, health insurance and stock options that are available to the employees of the company, making investing in one’s own company stock even more attractive.

Company Stock Risks

Individuals must also understand that there are risks associated with investing in their own company stock. While stock prices can appreciate significantly, they can also depreciate, depending on the performance of the company itself. Additionally, because many companies have transferred the responsibility of managing stock portfolios to their employees, they can become largely exposed to financial risks, such as the potential of market crashes.

Also, lack of diversification when it comes to investing in one’s own company stock can be a major risk. By putting all their eggs in one basket, investors can be subject to catastrophic losses in the case of a market downturn. Further, investments in one’s own company may be affected by any scandals associated with the company. If a company, for example, is involved in an ethical issue, it moves its shares lower and, thus, the employee may suffer a large loss.

Finally, those who buy company stock through an employee purchase plan may be subject to additional restrictions. These can include caps on how much stock may be purchased, or limits to how long one must hold the stock before being able to sell it. Such restrictions can have a significant impact on the success of one’s investment.

Do Your Research

Ultimately, when it comes to investing in one’s own company stock, it is essential to research the company thoroughly. Employees should find out about company policies, the company operations, and its financial performance to make an educated decision. Additionally, it is important to understand one’s own risk tolerance so that the decision of whether or not to invest in the company stock can be made in an informed and mindful manner.

Investors should not be swayed by the potential benefits alone, but should also take account of the risks that may be involved in investing in the company stock. Furthermore, they should also be aware of their own financial situations, as well as any specific company rules and restrictions, to determine if their investment will be a good one.

Diversify Investments

In addition, it is important to remember that investments should be diversified, so it is important to think about investing in other companies, stocks and bonds as well. Making a diverse portfolio is key, even if one is interested in investing in their own company stock. An optimal mix of investments is one of the best ways to reduce risk and increase returns over the long-term.

When investing in one’s own company stock, investors should also consider their own financial goals. For example, if the goal is to save for retirement, one can be more proficient if they invest in stocks and bonds designed for retirement goals. Investing in one‘s company stock may also be a good way to go if the goal is to pay for college education for one’s children, as stocks usually provide higher returns over the long-term.

Consult a Professional

It is always good to consult a financial professional before making any investment decisions, especially when it comes to buying company stock. A financial advisor or planner can provide unbiased advice regarding the potential risks and benefits of investing in the stock of one’s own company. They can help individuals design an appropriate plan tailored to their individual needs and financial objectives.

Also, since they have access to much more detailed information on the company in question, they can provide a more comprehensive analysis than what is available in the public domain. They can assess any specific restrictions associated with employee stock purchase plans and can make their own recommendations based on their review of the company’s financial stability and market performance.


Investing in one’s own company stock can be a great way to boost income, increase pride and self-satisfaction and increase one’s stake in the company. However, there are some potential risks associated with such an investment, so it is important to be informed and weigh the pros and cons before making any decisions. Doing intensive research to assess the company’s financial performance, learning about their plans and policies, and consulting a financial professional are all critical steps in the decision-making process. While investing in one’s own company stock can be a rewarding experience, it is important to take time to understand the risks and rewards.

Wallace Jacobs is an experienced leader in marketing and management. He has worked in the corporate sector for over twenty years and is a driving force behind many successful companies. Wallace is committed to helping companies grow and reach their goals, leveraging his experience in leading teams and developing business strategies.

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