What you need to know about your employee stock purchase plan

Advisors


The company you work for may let you purchase company stock at a discounted price.

The formal name for this is an “employee stock purchase plan,” or ESPP.

And if used correctly, these stock purchases can boost your bottom line, according to Sophia Bera, founder of Gen Y Planning.

Here’s how it works.

Your company lets you buy its stock at a discount, which can range from 10 percent to 15 percent, for example.

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If you choose to participate, the deductions are taken out of your paycheck, just like your 401(k) contributions.

The stocks are then bought in bulk at one point in time, alongside other employees’ contributions.

That purchase typically happens every six months.

You then have the ability to sell those shares immediately and lock in the gains from the discounted price you paid, Bera said, or you can hold on to your shares for later.



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