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What is the best strategy to invest Restricted Stock Units (RSUs) income?

Started by pat, December 01, 2018, 11:31:58 AM

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Generally Restricted Stock Units (RSUs) keep on vesting every quarter, ideally what should person do with that income? Sell immediately and diversify?

Fat Tony

Sell ASAP and diversify. If you're getting RSUs from your employer, they're taxed at regular income rates without any tax benefit that might occur to other types of stock-based compensation like ISOs. Thus, you earn nothing from holding. Think of it this way, if you were getting that $X annually from your employer in cash rather than their stock, would you go back to your brokerage account and buy your employer stock?

Tying your regular income (salary - not being laid off if the company goes south), your future compensation (future RSUs are generally fixed at the price when you start - thus 2018 stock movements will impact 2019 income), health insurance, and current investments (vested but not sold RSUs) all together is generally not a good idea.

The situation is  a little different different for ESPPs, where you may be able to purchase your employer stock at a significant discount e.g. 10%. However, the recommendation is nearly always the same: Diversify quickly.