Are Stock Options Worth It?
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- čas přidán 25. 08. 2024
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Equity compensation like stock options used to be reserved only for C-suite executives. But today it seems like most employers are offering them to their workers... but are these "golden handcuffs" worth the tax headache?
Two Cents is hosted by Philip Olson, CFP® and Julia Lorenz-Olson, AFC®
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Written by: Julia Lorenz-Olson, AFC®
Executive Producer: Amanda Fox
Produced by: Katie Graham
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It is crazy how complicated some of this gets! Thanks for the great video
Wtf random ass guy I never heard of and bam 2.5M subs haha YT is hugeee
@@Monkehrawrrr you should check his videos.
@@silvervortex2441 Ya I did, not my thing but hey glad people like it!
@@Monkehrawrrr Fascinating how the CZcams-verse is a big one. I share your sentiment. Sometimes I'd come across a channel and be like, 'wait whaat!'
I love Jared though, his 3D videos are fascinating. I've been following him for many years now.
@@KhoPhi Ya for real there is CZcamsrs out there with tens of millions of subs that I have never heard of, we all live in our own little bubbles I guess
Friend of mine's boss/founder described the stock options he was offering as "I can promise you enough stock options to wallpaper your house with. I can't promise that won't be the best use for them."
I think another important thing to consider when discussing equity with a future employer is to ask if they have a “clawback provision“. A lot of people assume that if they purchase or receive equity from their employer that they will be able to still hold onto it even if they leave the company. That’s exactly what the clawback provision stops people from doing and a lot of employers don’t tell their employees about this until after they’ve accepted an offer. It’s pretty deceptive imo.
Hello can you help me to get template of that contract equity with that u explained
Don't forget that in the Diversification section, you might simultaneously lose your job and have your stocks/options plummet when the company or *sector* is in trouble. You're already functionally diversified in the sector of your career, so if you do take the stock options, you have to heavily invest in other sectors to even the risk out.
That's also why pensionfunds in many countries have rules against investing in the company where you work: you risk losing your job _and_ your pension when the company has a big downturn
Additional earnings reports from major tech companies, driven by Nvidia, coupled with trader FOMO, could fuel a resurgence in market buying pressure. I'm considering investing over $300k, but I'm uncertain about risk mitigation strategies.
Nvidia stock is roaring like many did during the 1990s bubble. But this time around, the hype around new chips is happening in a more mature demand environment.
Accurate asset allocation is crucial, and some individuals use hedging strategies or allocate part of their portfOlio to defensive assets for market downturns. Expert guidance is vital for achieving this. This approach has helped me stay finan-cially secure for over five years, yielding nearly $1 million in returns on invest-ments.
Please can you leave the info of your lnvestment advsor here? I’m in dire need for one
Colleen Rose Mccaffery’’ is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
Thank you for the lead. I searched her up, and I have sent her an email. I hope she gets back to me soon.
Stock options are phenomenal at companies that are actually making money. Most startups, especially the ones burning cash, either are worthless or are diluted so much that they end up being worthless. Never take a lower salary (cash) for more stock.
I can attest to this from personal experience - they’re useful if…
- company is acquired and options are liquidated
- company is profitable (already mentioned)
- company goes public
Yep. Considering 3/4 of startups never make it treat this benefit with grain of salt.
But those are also the ones with the highest growth potential
@@luisandrade2254 So? Some lotteries also have the highest growth *potential*
@@magix2u are you seriously comparing investing in a company with playing the lottery 😂😂😂
I sell off company RSUs and ESPP shares as soon as they vest and channel that money into diversified index funds. Holding large amounts of money in an individual company's stock is very risky. Additionally, the time during which a company's stock price goes down is also a time when layoffs may be more likely, increasing the risk further.
Although the companies in my portfolio are solid, last year was a loss. In my first year of investing, I experienced a 35% decline in the March/April sell-off and a further 17% decline in the most recent sell-off. I earn my money via hard work, thus investing makes me anxious and depressed. I'm uncertain if I should sell everything and wait.
Sell not, I say. Avoid attempting to time the bottom by selling merely for the sake of selling. That is gambling with taxes added on top of it to slap you in the face. Keep it real and keep thinking long term!
@@svengrot7943 --
--The time for selling is now over. Since the two aren't necessarily associated, if your investment was down 35% this year, you're not buying good businesses or stocks. The best businesses on the planet are found in the S&P. Contrary to what some claim. The return on the S&P last year was 27%. That's amazing if you enjoy ARK. The research and transparency some CPA uses are admirable. However, it is simply irresponsible to not be assigned to what is likely the best index in the planet.
@@glenbert1396 It's difficult for me to participate in the market right now because my job is full-time, even though I'm a novice and make awful decisions. I don't even consider combining since the stress would be too great; hence, I am unable to spot trends.
@Lloyd Bernard Do you intend to "follow trades" by mirroring her trades, like in etoro? I hope I don't have to give my money to anyone. She is registered in the US, I just discovered when I looked her up. Does she have a minimum to work with?
@Lloyd Bernard I did check her out, and after seeing her credentials and resume, I can see why you stated she is likely full up. Regardless, I scheduled a consultation with her.
This is the first Two Cents video that gets me really confused because of how complicated the topic is. Kudos to you guys for helping to improve financial literacy for everyone.
I've been a software engineer for 16 years, and this shit is still tricky for me.
Stock options are absolutely worth it, for those already making 6-7 figure salaries. If you make $40K a year, you'll never be able to buy enough to make a significant difference unless you get employed early in the company's history, and you get lucky enough for their stock price to explode.
very informative as always! You guys rock!
Excellent intro to a varied and deep topic, thank you! BTW, LOVE the IRS Eagle logo character! Something about it is both mighty AND terrifying!
My brothers girlfriend is working at amazon she got every year instead of money as a bonus Amazon shares as a christmas gift. And over the years it went up to 100 000€. It can be a really good but depends on which company you are. Amazon's stocks went up a lot during pandemic.
As simple as the explanation was made, this video would need to be watched several times to better understand stock options. My head spinning
As someone working at a startup…this is the only way 90% of companies compensate with “equity” (which it is not)
Yeah useless options throw at you and diluting more by getting investors.
I have challenged myself to put away 50% of my monthly income into stock options which is quite easy since I live frugal without debt. I work as an account executive, and make over $20000. $10000 goes into dividends, and the other $10000 covers my my food plus living expenses. I am seeing improvements in my portfolio, dividends look certain, but I have to attribute this to only to guidance of a licensed fund manager who allocates funds to a plethora of assets. I have to stay disciplined, and remember that I’m in it for the long term. Good luck to everyone and thanks for the great video.
I found it useful to learn of a savvy financial advisor, Herma W Jonas, who has particularly helped me earn returns from stocks, ETFs and forex.
With his unwavering help, I’ve been able to split my holdings into a plethora of assets. Here,
I have made over $25,000 in profits, more so because I was reinvesting every two weeks. His strategies cuts across major financial markets which cuts across major markets which I found to generate more profit.
Obvious bots are so fucking... I hate this so much
This whole thread are just bots advertising some guy. If anyone has read the above comment and replies, just know that those weren’t real people.
Depends, Microsoft stock option, hell yes!
Carvana stock options, probably notlol
Stock options are usually granted by startups that don’t even trade publicly yet. So pretty much worthless. Microsoft likely grants actual RSUs.
I think of these things as nice bonuses, but I only rely on my main shovel (base salary) to fund my life and retirement. Anything else is just icing.
I was given craptocurrency as equity for a prior job. I had to hire a tax lawyer just to fight the irs because the company reported it incorrectly, then declared bankruptcy - long story short, Crypto sucks.
Most offer RSU's it's not as tax favorable for an employee 😥
Another confusing thing is when a company offers you shares but they're a different category of shares. I've heard them called "B" shares. I can't say I understand the first thing about them.
Probably has less voting rights or no voting power. If you’re not going to vote anyway, doesn’t matter.
I think as with most employee benefits, it gets better the longer you stay. I worked only two places and the first place I worked was a difficult decision in part because they did a 401k match with partial vestment. Due to me leaving when I did, I did not get the full match, which cost me quite a bit of money. In the end I believe it was okay because I'm much happier at my other job. I don't like the handcuffs metaphor as you are free to go any time you would like. It is weighing the costs and benefits of staying and reaping the rewards of doing so, or leaving for possibly greener pastures.
@Julia and Philip: why don't you turn on the "Thanks" option on CZcams? Not everyone is using Patreon.
Thanks for the content.
WallStreetBets would like to input their opinion.
Very accurate in your analysis. I was fortunate to make lots of money in stock options and ESPP. The company was well established and not a startup, but at the time was still in a growth industry. I eventually cashed out and bought dividend paying stocks and I'm now living on those. I'm retired. Investing is a marathon, not a sprint.
what was your position?
7:59 Money is a renewable resource, time is not. So true!
Why on Earth are you guys removing this ??
@4:00 That's not an example of progressive taxation. That's an example of marginal taxation.
Marginal taxation staggers the tax rate. This staggering could be either progressive (rising) or regressive (falling), there is no requirement to be progressive.
Progressive taxation just increases the tax rate for blocks of income, that is, the more you make the more you're taxed. Marginal taxation is not a requirement here.. You can have a progressive taxation system that doesn't implement marginal taxation. It would tax the full amount of your income at the higher tax rate.
...
Its aprogressive taxation based on marginal income brackets.
Please do a full video on AMT!
Would you guys ever consider an episode on wage theft? aka when workers productivity is increased but wages actually decrease when adjusted for inflation. How do the millions of working class people who fall prey to this from corporations avoid such traps, I'd love to know your 2 cents! 😄
Yes, please.
Boosting your comment so more people see and hopefully they do it. Too many people don't know they're being conned.
Making my head spin, thank you for exploring this topic!
I like how these guys have gradually shifted from Brady Bunch to Punk over the years I've watched them.
My company has an ESPP and I max that out but I just ignore it. That will be my play money someday and I hope that the stock does great but I also do my 15% in my 401(k).
Thank you for the simplified explanation
This is a fantastic video, thank you! It really makes all this stuff easy to understand. I just had my 25th anniversary at the company I work for and it's privately held so I don't know anything about this stuff.
The explanation of ISO tax treatment is not correct. You must hold the shares 2 years from of grant and one year from purchase/exercise to receive the most favorable tax treatment, not one year from sale.
By "options", I thought this was going to be about calls and puts, but yeah, this is probably the far more relevant "options" topic for the Two Cents viewership.
They did describe a call option, they just didn't use that term.
Yup I made that same assumption
@@wessydafall very loosely
@@ritzkola2302 @2:22 "The right to buy a stock at a certain price." That is exactly the definition of a call option on a stock. Not "loosely" at all.
@@wessydafall Yes very loosely:
1) Didn’t mention “call”
2) Didn’t mention the Greeks
It is a very loose description
Excellent! So glad I left the golden handcuffs! My mental health is better and my finances are diversified so I can keep my wealth!
Stock options instead of cash as payment is a lot like being paid with lottery tickets instead. Most companies that have to offer it do it because they are unable to offer higher salary and it sure is a risky bet. The really gross thing is vested options that try to make it not desirable for you to leave because your holding your hopes to some stock option…
At the 5 minute mark, you say that the $90 bargain element is taxed as ordinary income. That's not necessarily true. If you hold, you'll certainly need an AMT adjustment, but it is possible you may not pay any tax on that purchase since it is an ISO (and only pay tax when you sell).
As an active trader it’s funny I always forget these type of options exist lol. To me options are calls and puts to be bought and sold by average traders.
The company essentially “bought” some options for you.
Thank you for this vid. I needed this
Equity compensation - To sell employers own company before investors find out that the palace is a house of cards.
Thank you for this awesome video! So many startup employees are so young and this stuff is so complicated.
Is there a difference between exercising and executing? I exercised a lot of shares this year, does this mean I’ll likely have to pay an alternative minimum tax?
money is renewable, time isn't -- thank you for that
Why are you trying to murder me?
Please update your "all videos" playlist! CZcams took away its "play all" button on channel pages.
Doesn't a stock option also give you the right to sell a stock at a certain price?
please do a video on margin investing.
I would never take a stock option. I want cash. I don't give a shit if a company's stock goes from $33 to $34 a share. Me working 10% harder or 100% harder probably had a negligible impact on whether the stock is going to go up or down. If you're not joining a company at the beginning of its life, it's too late for any stock explosion to build any meaningful wealth. My landlord doesn't give a shit if I have stock in where I work for; my landlord wants cold hard cash. If companies want employees to quit/leave less so they don't lose money from having to constantly fill positions, maybe just pay everything a fair fucking wage so they don't feel the need to look elsewhere to get any sort of pay raise.
TL;DR, stock options are a sham made up by the companies to fuck you over yet again and keep their profits rising to give executives giant bonuses left and right.
Very informative and easy to follow 👍 👌
With the right approach stock options are probably one of the best trading instruments. Although the topic is not quite simple, when a trader obtains the right knowledge and skills everything becomes clearer than morning air)
I wish everyone good deals!
Options are certainly worth it. I personally only trade 0dte spy options.
Dr Strange and the Alternative Tax Universe.
Please do more vedios. We love your channel.❤️
Well i wish I could have a portion of my salary paid in stocks. But then I'll probably have to stay with my employer and i don't stay in a position longer than two years.
Not me watching this as if it pertains to me with my minimum wage 😂
when I was young I thought physics is the hardest subject to understand , but now 🤐
Thanks
This is definitely the most complex video you've made yet hahaha
I thought you were going to talk about options such as selling calls and puts. I was going to say Hell Yeah, I've been doing that in 2022 and made more than $7,000 in side income
BRING BACK THE MUSTACHE.
So..............usually no 😅
great video!
guy looks like ryan gosling
yes
Most beginners believe that investing in cryptocurrencies and stocks is about holding it up, with the recent market crash and recession. We must know that long-term price predictions are very difficult to achieve. It is better to trade short term and make a profit
Update
When you need an accountant to understand stocks its not a good investment in my view.
You got everything to loose, whereas the companies who get the cash have nothing to loose.
Id rather invest in a cdr at my bank. At least my money is guaranteed that way.
"Money is a renewable resource, time is not."
Was that a death threat?
So I’m looking at a job that has informed me a portion of my income will be in some form of stock option should I be hired. 90k salary with 20k in stocks. After state and federal income that would leave me with ~65k salary. Is this a good deal or not? It would be my first real job and I’m trying to decide. Thanks.
20k in stocks? Every year, every month or biweekly? When will it be vested? Is it matched? Is thier stock volatile, do they give it to you in market value?
What type of job is it? I need a career change. Advice always welcome. Ty
@@corysturgis6660 most entry level jobs, software eng, even residency for MDs don't pay 90k USD. The problem is if first "real" job means zero experience in talking to clients, collaborating with multiple disciplines, you essentially make no money for the company in the first few years. Companies have to train you, cultivate your skills properly.. etc, and it takes time. Of course there are exceptions, such as nepotism, Havard grad w/ extensive co op.. etc
Compare to whatever you have for now, it'll be easier
If the 65k is a normal salary for the job, the options could be considered a bonus. If 90k is the normal salary I would looke more closely at the conditions attached the options and quality of the stock.
Employee Stock Purchase Plans are especially risky when it comes to diversification. You might be surprised how much of your entire portfolio you end up investing in a single company when it's deducted in small amounts monthly pre-tax. Even within the IRS limits.
Subbed!
Bring back the 'stache!
American tax are a mess
I want to invest roughly $700,000 in stocks since I've heard that even in challenging times, investors may turn a profit. Any excellent ideas for stocks?.
It's crucial to have a well-thought-out strategy and not make impulsive moves based on short-term market fluctuations. Patience and a long-term perspective are key. You should consider a market expert to guide you.
I’m a contractor, and my job doesn’t permit me the time to properly analyze my holdings/evaluate stocks myself, so I’ve had a fiduciary actively restructuring my portfolio for the past 7 years now to match the present market condition and that’s how I’ve been able to stay afloat, knowing when to buy and sell…maybe you should do the same.
Could you kindly elaborate on the advisor's background and qualifications?
The advisor that guides me is Sonya lee Mitchell, most likely the internet is where to find her basic info, just search her name. She's established.
I just checked her out and I have sent her an email. I hope she gets back to me soon
#bringbackthemustache
Thanks for a great video with great information without a strong political lean…..very refreshing from you guys these days :)
It's not the same without the mustache.
Kinda sad since almost none of the viewers here will ever get paid enough to benefit from stock option
Lots of scam bots in these comments.
ILLEGAL! You're employing a 4yr old! BAD!
lol
Another video! Woo hoo!
vest my chunks
Child labor love
0:33 what's up with that accent? effecctivvve
Ya. Nope. I would rather take the money in my paycheck. Stock markets are no better than the slot machines in Vegas.
why did they get tattoos? no 2 cents between them.
"money is a renewable resource, but time is not"
yeah, you need money to enjoy free time & you have to spend time to get money (usually/mostly)
You shave your mustache and grew your hair 😂🤣
It's not THAT complicated, once you just LEARN the math. If you have ANY of these things offered to you, you are probably working for a great company and/or are a hot commodity - if that's the case you probably have the aptitude to learn the math. Don't keep more than 5-10% in one stock (including your own company), but definitely hold until it makes sense from a tax standpoint. Usually after a few years, you can just churn through the ESPP, stock options, etc. when it makes sense and purchase other stock, ETFs etc. for diversification once you get going. Usually that 15% discount for ESPP will outweigh the stock performance in the long term, unless you're working for an ever-downward trending company, just sell at the end of the discount period each time.
Are these the same two that started this channels 3 or 4 yrs ago?
Child labour!
Why do beautiful people get tattoos?
Fresh Tattoos?
I see, so a stock market crash is imminent.
I love y’all, but I liked it when you looked like my parents. Now with exposed tattoos and modern clothing…just can’t do it.
No, it’s a certified way to blow up your account.
😂 stock options are not the same as degenerate gambling on calls and puts.
Sounds like you learned the hard way and now have PTSD at the mere mention of the word "options".
What happened to yerman’s tashe?? Unsubscribed!
Is capitalism evil and is a post growth economy possible are video ideas
no "ism" is evil, it's just the way people abuse and exploit them which applies to every "ism"
These are First World Problems. If you get promoted to a position/company that offers stock options, then you have the money to pay a professional financial advisor (and not get free advice on CZcams).
A lot of the professional financial advisors out there lose your money, mismanage it, or offer lackluster gains. The best thing you can do is learn yourself from all of the free education that exists, like this CZcams channel. The more you learn, the better you will get at investing your money. You'll save money on financial advisors and likely see higher returns.
Dear PBS associates and presenters: Please stop with all the artificial hand gestures. I find your videos almost unwatchable because of them. They are unnatural and off putting, and they are common to all channels bearing the PBS logo.
Why do you think there artificial. Your strange.