Keep RSU or reinvest the money?

btcp

I'd benefit from some advice on keeping RSU vs selling and reinvesting. 

I have company RSUs which increased in value around 50% in the last 5 years, the company is still growing. On one hand, it is giving me some confidence and hope that it will continue to grow and my stocks will be more expensive. On the other hand, I am reading that it is not advisable to keep stocks of one company if you are not an experienced investor (which I am not, I have a S&S ISA with ready-made funds in it). If I decide not to keep them, I could sell and put the money in my pension (which will automatically add 20% to it and potentially grow more). My workplace pension have a balanced approach and I don't have too much ability to diversify, so 50% may not be achievable. Alternatively, if I want to have access the money before my retirement, I could reinvest them in S&S ISA.  But looking at my ISA now, I only see 12% increase (I have it for 2 years). I have around 20 years to my retirement. 

Also if it's not advisable keep one stock, the question is why our board of directors holding these stocks, and looking at the insider sales no one sells significantly. I understand where I am and where the directors are, but isn't it an indicator that the stock is good and it's better to keep it?

Appreciate your views. 

dunstonh

I remember  the days when bank staff that had become millionaires through decades of share options and SAYEs only to find they lost the bulk or even the lot in the credit crunch because they failed to diversify.

 If I decide not to keep them, I could sell and put the money in my pension (which will automatically add 20% to it and potentially grow more).

Tax relief is 20%.  Whilst it is a 20% deduction, if you want to treat it as an addition then it equates to 25%.   Do not forget that you can hold the same shares in the pension wrapper if you wish.

Also if it's not advisable keep one stock, the question is why our board of directors holding these stocks, and looking at the insider sales no one sells significantly. 

The directors may well have larger holdings and it gives them voting power.  They may have confidence in themselves which may or may not be misplaced.

but isn't it an indicator that the stock is good and it's better to keep it?

No.

btcp

dunstonh said:

I remember  the days when bank staff that had become millionaires through decades of share options and SAYEs only to find they lost the bulk or even the lot in the credit crunch because they failed to diversify.

 If I decide not to keep them, I could sell and put the money in my pension (which will automatically add 20% to it and potentially grow more).

Tax relief is 20%.  Whilst it is a 20% deduction, if you want to treat it as an addition then it equates to 25%.   Do not forget that you can hold the same shares in the pension wrapper if you wish.

1st point - I suppose you hope it will not happen to you, while you are working for a big technology company
2nd point - I cannot do it in my workplace pension, can I open a second pension account to do so? I suppose I can get a SIPP, don't see why not.

conradmum

My husband just sold the Amazon shares he was awarded as part of his remuneration and used the money to max out this year's ISA allowance in a Vanguard S&S ISA. He's 55 and looking towards retirement, so it didn't make sense to have that money at risk from Amazon's share price plummeting (unlikely in the near future but you never know). We had to pay a whack of tax to sell them, but that would be the case whenever we sold them. And, I believe, if they'd increased in price between receipt and selling the difference would be subject to capital gains tax. Perhaps we've played it too safe but it's brought some peace of mind. Of course, it would be even 'safer' to put the money into a cash ISA. Maybe the entire stock market will plummet tomorrow, but we don't depend on the money being there so an S&S ISA was an acceptable risk.

btcp

conradmum said:

My husband just sold the Amazon shares he was awarded as part of his remuneration and used the money to max out this year's ISA allowance in a Vanguard S&S ISA. He's 55 and looking towards retirement, so it didn't make sense to have that money at risk from Amazon's share price plummeting (unlikely in the near future but you never know). We had to pay a whack of tax to sell them, but that would be the case whenever we sold them. And, I believe, if they'd increased in price between receipt and selling the difference would be subject to capital gains tax. Perhaps we've played it too safe but it's brought some peace of mind. Of course, it would be even 'safer' to put the money into a cash ISA. Maybe the entire stock market will plummet tomorrow, but we don't depend on the money being there so an S&S ISA was an acceptable risk.

Thanks for sharing your experience. I am a bit younger but considering a similar option.
You are right about tax, with RSU they take it out at vesting and then capital  gain tax would be due if the profit it is above the certain amount. 

george4064

Personally, I have not participated in RSUs but I have participated in a few Share Incentive Plans and Share Options. I have also taken the shares as soon as the highest % tax benefit is available, usually 5 years and immediately re-invest the money in my diversified S&S ISA.

Albermarle

 I cannot do it in my workplace pension, can I open a second pension account to do so? I suppose I can get a SIPP, don't see why not.

You can open as many pensions as you like , as long as overall you do not go over the annual contribution limits.

You will need an investment platform that offers SIPPs and is capable of holding individual shares . There a quite a few , all with different charging structures .https://monevator.com/compare-uk-cheapest-online-brokers/

If you change your mind about holding your shares at some point , these SIPPs offer thousands of alternative investments .

 My workplace pension have a balanced approach and I don't have too much ability to diversify, so 50% may not be achievable.

Clearly 50% every 5 years , is well above normal returns for a balanced workplace pension fund . On the other hand if the market dives , the balanced fund will not go down as much. 

 I could reinvest them in S&S ISA.  But looking at my ISA now, I only see 12% increase (I have it for 2 years)

An S& S ISA in itself does not generate investment returns . It is the investments you hold within it .

So just as an example  if you held 100% US equity funds as compared to UK funds , you would see a big difference over the last couple of years

dunstonh

1st point - I suppose you hope it will not happen to you, while you are working for a big technology company 

I suppose the bank staff hoped it would not happen to them whilst they were working for a big bank.

Holding a single company share in tech is very high risk. More so than a bank.   Also, tech has boomed in the last few years.   It is not normal return levels.    Tech fell around 90% twenty years ago when a similar boom happened.

Alice_Holt

dunstonh said:

1st point - I suppose you hope it will not happen to you, while you are working for a big technology company 

Holding a single company share in tech is very high risk. More so than a bank.   Also, tech has boomed in the last few years.   It is not normal return levels.    Tech fell around 90% twenty years ago when a similar boom happened.

      Holding substantial assets which are dependant on the financial health of the same company that pays your salary, does seem like having most of your eggs in one basket to me.

btcp

Albermarle said:

 I could reinvest them in S&S ISA.  But looking at my ISA now, I only see 12% increase (I have it for 2 years)

An S& S ISA in itself does not generate investment returns . It is the investments you hold within it .

So just as an example  if you held 100% US equity funds as compared to UK funds , you would see a big difference over the last couple of years

Yes, that's clear that it is about what's inside ISA. I have VLS 20% and 80%. Not sure I am knowledgeable enough in this area to predict what's going to grow faster so I bought ready-made funds.

jimjames

btcp said:

Also if it's not advisable keep one stock, the question is why our board of directors holding these stocks, and looking at the insider sales no one sells significantly. I understand where I am and where the directors are, but isn't it an indicator that the stock is good and it's better to keep it?

Appreciate your views. 

How do you know what the directors have in their portfolios? All you're seeing is one share. Yes it is risky to hold just one share but they may well have much larger portfolios and the share you know about could be a tiny percentage of it. So I wouldn't base any decision on what someone else is doing, make the decision on your situation.