What better stock to own than that of the company where you work, well, not so fast.
If you work in a startup, they might offer some company shares as part of the compensation in lieu of a cash salary. If you work in a large public company, they may also offer employee stock options or they offer you the right shares in the company at discounted prices.
Whichever way you come about those shares, it would seem plausible, especially if you are getting the stock at a discount to current market price.
However, the important thing is to understand risks and potential rewards of owning the stock of your employer.
The biggest risk is that, if something goes wrong with your employer, you could lose both your income and your savings/investment at the same time.
You probably think that because you are in sales and can see that the company is moving volumes and the stock should do well. However, only very few people at the very top of most organisations actually have the true picture of the organisation. So the risks are very real.
On the flip side, who wouldn’t have liked to be paid in Facebook or Amazon shares. Also, in the case of startups, owning company shares could give you a voice in the business.
Bottom line is to be mindful of putting all your eggs in one basket – so one needs to take quick steps to diversify your portfolio if you get that company stock.
Need a real life example of how bad things can get, look out for the story of Enron. An American company that went down in the early 2000s.
