My company has an employee stock program in which employees put a percentage of their paycheck into the company for a period of time, after which they can purchase shares at the lower of the start and end market price of the period, less 15%. At the end of the period, employees can sell and thus gain a profit of at least 15% (minus ordinary taxes).

My investment philosophy is that which involves only investing in no-load, low fee mutual index funds tracking the S&P. However, I believe the employee stock program would result in a higher profit that can be reinvested in a mutual fund, as opposed to forgoing the employee stock program and investing strictly in the mutual fund.

The shares in my company's employee stock program just vested and I wish to sell it and move into a no-load, low-fee mutual index fund tracking the S&P. This will be my first time doing so, out of a 401K.

The question arises as to the mechanism by which I do this-- lump sum investing or dollar cost averaging.

I intend on holding these stocks for 10-30 years before selling, depending on whether or not I wish to start a business or obtain a down payment for a home. For the time being, I will never add to this mutual fund except for when I sell the stocks in the employee stock program, as my total investment dollars are allocated to the 401K and the employee stock program.

I am inclined to sell tomorrow morning and transfer the returns in a lump sum into a mutual fund tomorrow afternoon. I am a long term investor, and if the market crashes tomorrow evening while I invested a lump sum at the height, I won't sweat it as I wouldn't touch the money for at least 10 years (assuming I even start a business; otherwise it would be 20-30 years). If the market goes up for 6 months and then crashes, the gains in those 6 months would be irrelevant as I intend on investing for the long term.

In other words, if I am a long term investor focused solely on no-load, low-fee mutual index funds, should I spend the time and transaction costs on dollar cost averaging when I receive a lump sump, or should I just invest it all in one lump sum and be done with it?


I think you're not applying the right time scale here.

ESPP (Employee Stock Purchase Plan) is usually vesting every 6 months. So every half a year you receive a chunk of stocks based on your salary deduction, with the 15% discount. Every half a year you have a chunk of money from the sale of these stocks that you're going to put into your long term investment portfolio.

That is dollar cost averaging. You're investing periodically (every 6 months in this case), same (based on your salary deferral) amount of money, regardless of the stock market behavior. That is precisely what dollar cost averaging is.

  • +1 - Maybe OP thinks DCA means monthly? – JTP - Apologise to Monica Jul 7 '14 at 18:06
  • Well that is a good point. However I was figuring that I could invest 1/6 of the lump sum I get from selling the ESPP and sell it each month for 6 months, as opposed to investing the whole lump sum on one occasion. – Matthew Moisen Jul 7 '14 at 20:47
  • to what end???? – littleadv Jul 7 '14 at 22:41

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.