When to Cash Out on RSUs

Stock Options and RSUs are part of some compensation plans as an incentive to help the company succeed. As these asset vehicles vests, the amount of stock you hold in your company grows. There are real money assets and should be treated as part of your total portfolio. Most would agree that you should have less than 10% of your total invest-able portfolio in one single company. If you let the assets vest over time, this may grow over sized and is generally a good idea to reduce the exposure and invest in other areas with the cash generated.

How’s it goin everybody this is beauty push today i’m going to talk about when you should cash in on stock options or rs use stock options and rs user is something that you get as part of your compensation plan usually if you work for a start-up you would get some stock options as an incentive to work harder to try to bring the company public to make the stock

Price worth something alternatively unicorn companies such as facebook snapchat or uber might give something in the form of rs use which is basically shares of stock that you get outright for free you do not have to pay for it you do not have to exercise at a certain price you just get the stock itself and it’s yours to keep or you can sell it at the full value

Now i’m not going to talk too deeply about the tax implications of short term versus long term sales i’m going to talk more about how you should take it in terms of an investor as an investor you have to ask yourself if you do not work for that particular company would you go on the open market and actually buy those shares yourself and keep it in your portfolio

Oftentimes when you work for a company you might have an emotional attachment and this might bias your view on how much the stock is worth it is true that some people might do very well because they just take all the stock options or the rsu’s and they just never sell for many many years and at the end they sell it all and they make millions or something this is

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Essentially the same thing as you taking your cash and buying stock in that company over the many years and then letting it grow it just so happens that the company that you work for had the stock price increase and therefore you had a large increase in whatever you put in when your stock option vests or the rs you vests is as if you took your own cash and bought

More and more shares of it so you really need to look at how much that you’re holding in the company is that fits well with what you want in your portfolio as i said in previous videos whenever you invest in a particular single company is actually a very risky thing to do normally for me to invest in a particular company i would look at a really large number of

Companies actually and i would follow the stock information on its news read all the information i can try to value the company itself and when you’re actually part of the company and you know you know projects that you’re working on you are inherently going to be biased and how whatever you know since you’re living in it from day to day it’s going to bias you

Maybe something wrong is happening in your team or something then you go oh yeah you know the whole company is doing that but little do you know it’s just that particular team is doing that and therefore it will cause you to sell so when you hold stock in the whole company you really need to evaluate the company as a whole and this is very very hard to do if you

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Have stock options or rs use in the company that you’re working at now generally what i would do is sell the stock as they vest this is nothing personal with the company at all it is more for diversification and if you look at ceo pay they often get a lot of stock options or research’s stock options vested and what they do is they sell this immediately and they

Take the cash and run with it so it’s more of a diversification type because it’s a very very rare instance for me to go and buy thousands of dollars of a single company as i said even if you’re going to invest in a single particular company you really should restrict the amount that you invest to less than ten percent per company this is just a diversification

Thing because you don’t want all your eggs in one basket for most people and myself included i do not think i’m a very very good stock picker although i’ve had previous investment videos where i’ve selected one particular stock that i was very very sure of out of a lot of research and i recommended it such as the i-x e oil index fund that happened to do well but

If i repeated a couple of times more i might not be able to find stock just as good so my final recommendations for stock options are rs use is generally to sell them as they come in in order to reduce your exposure for one single company now some people it’s going to go in the comments and say also one so they did they held everything and then they end up ended

Up making millions yes that is true the idea here is when you hold a single company or a few companies the volatility is going to be really great yes there will be a lot of gains possible then but there’s also a lot of losses that’s also possible the way i’m describing things is really just as a prudent way yes you’re not going to get as much gain however you’re

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Also not going to get as much losses it’s just the way i would normally invest so give that a thought when you’re holding stock options or or s use you’re holding cash value here there’s a value inherent to it and this is actually bought by your own cash don’t think of it as shares is floating around because you can sell it immediately and get a bundle of cash

For it so this is the same thing as you taking that buttonholed cash and going out there and just buying some company in this case is the company that you work at don’t forget to give me a like on this video comment down below let me know if you’re the type that sells your stock options or rsu’s immediately in order to reduce your exposure if you’re interested in

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Transcribed from video
When to Cash Out on RSUs By BeatTheBush

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