I have been invited to invest a portion of my monthly wages in stocks for the company I work for (they'll match 30% of my investment). I'm interested in putting away some money for my family as I have a child on the way. I have absolutely no experience investing in anything and don't know much about financial matters generally.

What things are important to consider before making this kind of investment?

EDIT: Given one of the answers I should add that the company will pay all the fees.

  • I would recommend picking up two books to start your journey if you choose to: Start Late, Finish Rich - Bach and Rich Dad, Poor Dad - Kiyosaki.
    – Ross
    Commented Nov 18, 2015 at 14:49
  • Is the stock publicly traded? How long after purchase must you hold it? Commented Nov 18, 2015 at 19:56
  • The stock is public traded. I don't recall a minimum holding time, I will verify that though. Also, the company pays the fees.
    – Prinsig
    Commented Nov 18, 2015 at 19:59

5 Answers 5


I would pass on their deal if they will only match if you invest in their stock.

Think about when/if the company falls on bad times. What happens to the stock of a company when bad times come? The board of directors will reduce or eliminate the dividend payout. Current and potential investors will take notice. Current owners of the stock will sell. Potential investors will avoid buying. The price of the stock with go down. And, quite likely, the company will lay off workers.

If/when that happens you would find yourself without a job and holding (almost) worthless stock as your savings. That would be quite a bad situation to be in.

  • 1
    The question has important details missing. If the stock is publicly traded and he can sell every 3 or 6 months, does your answer change at all? Commented Nov 18, 2015 at 19:57
  • @Joe nope, not really. There is just too much risk when Investing in the stock of individual companies. BTW: Selling that often is speculation, not investing. Besides, I am sure there is some kind of restriction on selling shares in such an offer. Most common is that the shares matched by the company do not fully vest until held (in escrow) for 13 months. Commented Nov 19, 2015 at 11:48
  • +1 for an intelligent answer and comment. We all have different levels of risk we are comfortable with. My company ESPP offered a 15% discount, 6 month cycle, and we could sell as soon as shares hit our account. For my wife and me, we had 5% of a year's pay at risk for 3 days twice a year. To your point, a number of our coworkers did not participate. For OP here, I'd hesitate only if the shares were illiquid or there were a longer holding period. Commented Nov 19, 2015 at 13:23

Does your job give you access to "confidential information", such that you can only buy or sell shares in the company during certain windows? Employees with access to company financial data, resource planning databases, or customer databases are often only allowed to trade in company securities (or derivatives thereof) during certain "windows" a few days after the company releases its quarterly earnings reports. Even those windows can be cancelled if a major event is about to be announced. These windows are designed to prevent the appearance of insider trading, which is a serious crime in the United States.

Is there a minimum time that you would need to hold the stock, before you are allowed to sell it? Do you have confidence that the stock would retain most of its value, long enough that your profits are long-term capital gains instead of short-term capital gains?

What happens to your stock if you lose your job, retire, or go to another company?

Does your company's stock price seem to be inflated by any of these factors:

  • Reliance on "fad" products.
  • Boom-time profits that might end in the next couple of years.
  • The company has been "buying growth" -- Its revenues are going up, because it buys other companies.
  • Funky accounting (sometimes called "earnings management").
  • Borrowing short-term, and lending long-term.
  • Borrowing in a different currency than where the company's investments and/or sales are.
  • Temporary cost-cuts, especially ones that might hurt the company's reputation or ability to get business.
  • Aggressive year-end sales practices that pull future sales into the current year.
  • High Price/Earnings ratio, because the company is a "hot story" on Wall Street.

If any of these nine warning flags are the case, I would think carefully before investing.

If I had a basic emergency fund set aside and none of the nine warning flags are present, or if I had a solid emergency fund and the company seemed likely to continue to justify its stock price for several years, I would seriously consider taking full advantage of the stock purchase plan. I would not invest more money than I could afford to lose.

At first, I would cash out my profits quickly (either as quickly as allowed, or as quickly as lets me minimize my capital gains taxes). I would reinvest in more shares, until I could afford to buy as many shares as the company would allow me to buy at the discount.

In the long-run, I would avoid having more than one-third of my net worth in any single investment. (E.g., company stock, home equity, bonds in general, et cetera.)


It appears your company is offering roughly a 25% discount on its shares. I start there as a basis to give you a perspective on what the 30% matching offer means to you in terms of value. Since you are asking for things to consider not whether to do it, below are a few considerations (there may be others)

  • in general you should think about your sources of income. if this company is your only source of income, it is more prudent to make your investment in their shares a smaller portion of your overall investment/savings strategy.

  • what is the holding period for the shares you purchase. some companies institute a holding period or hold duration which restricts when you can sell the shares. Generally, the shorter the duration period the less risk there is for you. So if you can buy the shares and immediately sell the shares that represents the least amount of relative risk.

  • what are the tax implications for shares offered at such a discount. this may be something you will need to consult a tax adviser to get a better understanding. your company should also be able to provide a reasonable interpretation of the tax consequences for the offering as well.

  • is the stock you are buying liquid. liquid, in this case, is just a fancy term for asking how many shares trade in a public market daily. if it is a very liquid stock you can have some confidence that you may be able to sell out of your shares when you need.

  • personally, i would review the company's financial statements and public statements to investors to get a better understanding of their competitive positioning, market size and prospects for profitability and growth. given you are a novice at this it may be good idea to solicit the opinion of your colleagues at work and others who have insight on the financial performance of the company.

  • you should consider other investment options as well. since this seems to be your first foray into investing you should consider diversifying your savings into a few investments areas (such as big market indices which typically should be less volatile).

  • last, there is always the chance that your company could fail. Companies like Enron, Lehman Brothers and many others that were much smaller than those two examples have failed in the past. only you can gauge your tolerance for risk.

As a young investor, the best place to start is to use index funds which track a broader universe of stocks or bonds as the first step in building an investment portfolio. once you own a good set of index funds you can diversify with smaller investments.


Check how long you have to hold the stock after buying it. If you can sell reasonably soon and your company is reasonably stable, you're unlikely to lose and/or be taxed and/or pay enough in fees to lose more than the 30% "free money" they're giving you.

Whether you hold it longer than the minimum time depends partly on whether you think you can better invest the money elsewhere, and partly on how you feel about having both your salary and (part of) your investments tied to the company's success? The company would like you to "double down" that way, in the theory that it may make you mors motivated... but some investment councelors would advise keeping that a relatively small part of your total investments, basically for the same reasons you are always advised to diversify.


You really have asked two different questions here:

I'm interested in putting away some money for my family

Then I urge you to read up on investing.

Improving your knowledge in investing is an investment that will very likely pay off in the long-term - this can't be answered here in full length, pointers to where to start are asset allocation and low-cost index funds. Read serious books, read stackexchange posts, and try avoid the Wall Street marketing machine.

Also, before considering any long term investments, build an emergency fund (e.g. 6 months worth of your expenses) in case you need some liquid money (loss of job etc.), and also helps you sleep better at night.

What things are important to consider before making this kind of investment?

Mainly the risk (other answers already elaborate on the details).

Investing in a single stock is quite risky, even more so when your income also depends on that company. Framed another way: which percentage of your portfolio should you put into a single stock? (which has been answered in this post).

If after considering all things you think it's a good deal, take the offer, but don't put a too great percentage of you overall savings into it, limit it to say 10% (maybe even less).

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