Dear Dave,
My employer offers an employee stock purchase plan at a 15% discount. I’m usually the kind of guy who buys stocks and holds on to them forever. But when it comes to an opportunity like this, should I buy it and wait for a year to sell it, or should I buy it and sell right away?
John Dear John,
Generally, I don’t recommend buying single stocks at all. Single stocks are way too risky, and a 15% discount is nothing special in this kind of scenario. Virtually every single company out there that has an employee stock option plan offers a 15% discount.
In most situations like this, if you pull up a 52-week chart on the stock’s performance, you’ll find a variance of as much as 15% in those 52 weeks. In other words, you could lose any or all of that discount in one move of the stock. Plus, it’s not like 15% is a big discount to begin with. Fifteen percent off a single stock, considering how volatile theyare,isnobigdeal.But hey, if you love your company that much, they have a great track record, and the stock has a good history, go ahead. Just don’t allow single stocks asa categoryto make up more than 10% of your net worth.
The core issue here is a lack of diversification. When you put all your eggs in one basket, there’s always some clowntwirlingthebasket.The first time I ran into that was a long time ago with a lady whowas70yearsold.Shehad worked for a large company for 40 years. On top of that, she invested all her 401(k), all herwealth—$800,000total— in that one company. Well, this company experienced a crisis. It lost nearly half of its value, and her $800,000 was suddenly worth about $400,000. She left herself vulnerable with a high-risk play, John.
I’ll say it again. Don’t bet the farm on one horse, and don’t have more than 10% of your net worth wrapped up in single stocks. Hundreds of research projects have been done that show individuals who buy individual stocks and think they know what they’re doing actually lose money much more often than they make money.
— Dave Dear Dave,
When my wife and I got married, she had about $70,000 in savings and I had a lot of debt. We bought some property from her parents to build a home on, and she made a 20% down payment on the land from her savings. We’ve paid off some debt, and she has more in savings now. But I feel guilty, and it seems unfair to ask her to pay on our debt with her savings since most of it is debt I brought into the marriage. How do you feel about this?
Sonny Dear Sonny,
This question tells me you’re a good guy with a good heart. But let me ask you a thing or two. When your wife gets sick, is it unfair for you to take care of her? You didn’t cause it. It’s not your fault.
Dave Ramsey is a seven-time #1 national best-selling author, personal finance expert, and host of The Ramsey Show, heard by more than 16 million listeners each week. He has appeared on Good MorningAmerica, CBS This Morning, Today Show, Fox News,CNN,FoxBusiness,andmany more. Since 1992, Dave has helped people regain control of their money, build wealth and enhance their lives. He also serves as CEO for Ramsey Solutions.
Of course, it’s not unfair. I’m not mad at you, buddy. I’m just throwing your own logic right back at you.
Maybe these next lines will sound familiar: for richer or for poorer, in sickness and in health. The old “Book of Common Prayer” continues the vows and says, “Unto thee, all my worldly goods I pledge.” This is called oneness. It’s called unity. And it’s what a good marriage should be about.
Do you get what I’m saying, Sonny? The two of you are in this together. This is not a business partnership or joint venture. It’s a man and a woman pledging themselves, and all they have and are, to each other. I understand your feelings, but if you’re not careful, that kind of guilt will stand in the way of you two creating a successful marriage— both financially and emotionally.
When you got married, the “me” and “mine” became “we” and “ours.” You got all her stuff, the good and bad, and she got all of yours. Now it’s time for you to work as a team to make the bad stuff go awayandthegoodthingseven better.What’sfair(andwhat’s right) is to combine all of your income, all of your assets and all of your liabilities.
I know it’s uncomfortable, but you’ve got to choose courage. Ask her to go all in on this with you and attack your debt together. Work toward making your dreams come true together as one.
That’s what’s fair, and