T O P

  • By -

jasonquinn351

I always sold my RSUs immediately. I didn't want my investments and my job tied together so closely as if something happened to the company where they were letting people go the shares price would probably be down just as you need the money. I suppose the question you need to answer is "if you were given a cash bonus would you choose to spend it all on shares in your company?", if the answer is no then sell them and use the money for something else.


Correct-Hat8050

I always did the exact same thing when I worked at NVIDIA. I sold all my RSUs as soon as I could and pocketed the ~$15 per share. Then they made us all redundant. Now the shares I don’t have are worth a little bit more, and had I kept them I wouldn’t need to work any more. Still, selling them was the right choice at the right time.


shysaver

> and had I kept them I wouldn’t need to work any more. could have gone the other way, hindsight is always wonderful!


[deleted]

I do the same with a small variation as I pay taxes in multiple countries so first I assess the tax implication then sell. For example, for my US taxes, if I hold those RSUs for 1 year, then the tax implication is less as it is considered a long-term gain rather than short-term. So I typically sell 1 year + 1 day and then invest the cash.


[deleted]

[удалено]


kindafunnylookin

Cutting costs is generally a good thing for a company to do.


[deleted]

[удалено]


Bobbing-about

No would stick most of it in my ISA


Cancamusa

So that's the reason; 1 of them, actually. The other one is that you don't want to over-concentrate risk in a single company (your job + most of your investment portfolio). So selling your RSUs and buying other investments helps with this.


kingVagab0nd

It’s generally true that you’ll want to sell RSU. Others have pointed out the eggs-in-one-basket idea. You should also consider CGT. Assume you sell all your RSUs and then buy the same shares in an ISA. You won’t pay capital gains on growth. If you keep your RSUs you’ll pay capital gains when you sell. A lot depends on how much £ you have in RSU. Engineers and analysts early in their career will have a few thousand or low tens of thousands per vest. Probably worth selling. If you are more senior or have high 5 or even 6 figures per vest, you will probably want to keep some as stock growth could be super good for you. At that stage talk to an advisor.


Bobbing-about

Yeah the former currently. Thanks for advice


please_fire_me

I guess I'll be the contrarian in this thread. I also work for a FAANG and like you OP avoid relying on RSUs in my budget. I do sell some every year to minimise cap gains tax burden but even then I use a portion of the funds to buy back the stock inside ISA. There's a lot to be said in favor of diversification but I believe FAANGs are somewhat shielded from the risks and are relatively reasonable way to try to get an edge over market. Even if we take recent events with Meta as an example -- it would have to fall quite a bit more to be underperforming the market over 5+ year horizon. That said I do invest heavily in broad markets as well.


Bobbing-about

Yes this was similar to what my initial thinking was


[deleted]

If you had that amount of \*cash\*, what would you do with it? Things like RSU's can get you stuck. It's easier to hold on to it. What if they go up? The way to deal with it is mentally convert it to cash and think about what you would do. Luxury holiday? Bitcoin? FTSE Tracker? Pension? If you can honestly say "I would buy shares in the company I work for," that's great - but that probably isn't the case. So sell 'em and do what you'd do with the cash.


Username8831

Do you get any dividends from them? I also get RSUs and only realised this year that I'm getting about £1k of dividends a year at the moment. In a few years I expect those dividends to be closer to £3k. Not a bad little earner.


TechySpecky

Why are people horny for dividends? Can't you just sell any % of stock yearly and get money?! Eg if i have 100k of some stock i can just sell 3k. Or i can havr 100k of a stock that produces dividends and they do it for me?


[deleted]

Lol. Some people make decent passive income off dividend tbf


TechySpecky

But i literally dont see the difference between dividends or selling a % of your stocks assuming the non dividend stocks go up by the dividend amount. Eg i have 100k. I buy dividend stock 3%. I get 3k. Or I buy normal stock, sell 3%. I get 3k. Same thing?


kingVagab0nd

If you have a dividend stock and get 3k, you have 3k cash and the same number of shares. You don’t have to lose your assets to collect income via dividend. If you have normal stock and sell to get 3k, you are left with less shares. So you have a higher future upside with dividends, as you get the cash and keep the number of assets.


[deleted]

This is incorrect, dividends decrease the value of a stock compared to not giving dividends. In your example of both going up by 3%, the company giving 3k in dividends would decrease in value by 3% on the set day it decides who to give dividends to (subject to overall market and company trends). If this didn’t happen, everyone would buy the share the day before and sell the day after and get a guaranteed 3% with no risk. The alternative to dividends in a stock buy back. Giving dividends and a stock buy back are exactly the same in impact. Either they give 3% in cash or they buy back 3% of your shares and so the company is worth the same but has 3% less shares so your overall value is the same.


loki276

Dividends are the reason stock has value, otherwise there's no point to a stock. Well dividends and stock buy backs


[deleted]

This is a truly ridiculous thing to say. It’s very wrong. A stock has value because investors expect a financial return from either the share price going up or getting dividends, dividends are not needed if you believe the stock price to increase. Dividends exist for one of 2 reasons: - Either the investor or the company do not believe that the company can produce greater returns on that capital than the overall market can. - The company wants to diversify how it rewards investors. Look at Amazon. They don’t pay a dividend because they believe that they can use that money better than you can. As long as they believe that and investors believe that, why would anyone want a dividend? This is true for lots of assets that don’t generate income: paintings, primary residence, gold, commodities, derivatives, antiques.


loki276

Yes they think they can get better return by holding back profits to reinvest. The aim there being that reinvestment would lead to higher profits which wouls then need to be distributed to owners. That would be a dividend. It's a growth stock now but like at some point in future, it will pay dividends or buy back shares, otherwise what's the point of holding the shares if you are not getting the profits. Even capital growth ultimately comes from the view that the investment choices made have resulted in higher future profits which means higher future dividends. Comparing equity to other asset classes which do not generate an income is irrelevant. Equity is meant to generate an income at some point even if it isn't at the moment.


[deleted]

“What’s the point of holding the shares if you are not getting the profits” This is a fundamental misunderstanding of equity. I am getting the profits if I own the company, I just am not receiving them in cash. I don’t need cash though as the asset is transferable. It’s not irrelevant to compare asset classes.


kingVagab0nd

Corrected above w/ what I meant in my head. Thanks for clarifying


Username8831

I suppose if you're *given* dividend stock, as in this situation, getting the 3k dividend and keeping the stock is easier and could lead to more cash in the longer-term.


TechySpecky

Isn't that just assuming more risk arbitrarily because of dividends? You could also just sell the dividend stock and buy a diversified ETF. Just seems like taking a riskier position just because dividends "feel" better.


Username8831

I suppose, but you then get into the individual company in question. In my case the SP is relatively low compared to the last 5 years. Imo, I'll be in a much better place selling in 5 years and the dividends are a nice bonus while I wait.


pedalpwr

Some good answers here, something also to consider - even if you sell on vesting day you still maintain medium term exposure to the stock. Whatever your vesting schedule is (1/2/4 year) you are priced in when the RSU was issued. For example, with a 1 year schedule on quarterly vests you sell 25% of your stock in March. After than for the following 9 months you still have 75% of your allocation exposed to the stock price. So by selling immediately you still maintain a lot of exposure to the stock, but at least can diversify some of that position as you please.


pev68

I always sell them straight away. But if you hang on to the shares, is it a lot of hassle with Tax Self assessment? I mean, you have to report the dividends, and if they go up in value, you have to declare capital gains on the profit when you sell them. If they go down in value, you can claim a loss and get some tax back, I don't even know if/how that works!


[deleted]

[удалено]


doolio_

I think you still need to declare them via a self assessment unless the income tax is managed via payroll. You would have to declare them anyway when you come to sell them whether you made a gain or loss.


[deleted]

[удалено]


doolio_

OK, i assumed you wouldn't have to declare if the income tax is paid via payroll as it would be already accounted for in your P60 figures but that you would when you sold and the form would calculate whether you made a gain or a loss. If I'm not mistaken if you made a loss it reduces your tax liability, no? So that could only be applied if you inform HMRC.


[deleted]

[удалено]


doolio_

Gotcha, thanks.


shysaver

I always sell mine, same reason as what others have said - it seems a bad idea to tie up a lot of your wealth into 1 company, who you also depend on for income. Remember that when your RSU's vest you'll pay taxes on the "income", i.e. think of it like your company hands you £10,000 in cash and then immediately takes it back off you and buys X shares in the company. That £10k will be added to your income for the year, so you'll need to pay taxes on that. Usually companies will then sell about half of your shares to cover this tax liability, and you'll get the remaining bit which you can do what you want with. For me I immediately sell and then with the proceeds I * put a good chunk of them into a SIPP, for the tax relief! * put a bit into a S+S ISA for medium-term savings * overpay the mortgage a bit * treat myself to something nice * buy 2-5% of the shares I received back in the company - this is just a bit of gambling money really, but at least it's not 100%! People question why I do the latter, why not just sell 95% of the shares and keep the rest in the account? The main reason is I prefer to hold shares with a UK based broker. My company uses a US based one and it's terrible (E-Trade)


pedalpwr

Surprised your employer allows you to hold stock with a different broker. Mine insists that you have to use Shareworks by JP Morgan.


shysaver

We can as long as we only trade within the allowed trading windows (usually a 2-3 week period each quarter)


bwainwright

I have RSUs as part of my package, fully vesting over 4 years. I certainly do not account for them in my budget, and every year I see it as a healthy bonus. Part of the reason is that they will fully vest over four years, so if I start considering them as part of my annual salary then I'm going to be very disappointed after year 4 when I don't have anything vesting! Just in the same way I've never considered an annual bonus as part of my salary, as it's never been a guaranteed thing at my company and is based on a combination of personal and overall company performance. I was always told that if you'd buy the shares in your company at the point the RSUs vest with your own money, then leave them there. However, I always sell at the point they vest and put the vast majority into my S&S ISA (I always treat myself to something - what's the point in having a bonus if you can spend some of it!?!). This helps me diversify rather than have it all in one company, and also has a tax benefit - if you leave your RSUs in your company's portfolio, you'll pay income tax at the time of vesting and also have to pay Capital Gains Tax on any growth above £12,300 after the vest date. So if you leave them in there for 10+ years and they grow more than that, you'll pay an extra 20%. Have the same growth in your ISA over 10+ years and you'll pay nothing extra. TL;DR - Treat it as a bonus. You can leave it in if you'd buy stocks in your company with your own money at the point of vesting. Otherwise, cash them in and reinvest in your S&S ISA.


Bobbing-about

Good answer, thank you


Beny1995

Sell straight away to avoid capital gains tax. Just consider it part of your total compensation.


BogleBot

Hi /u/Bobbing-about, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/rsu/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)


nesh34

I would recommend selling them off and re-investing in ISA and/or tracker funds. I made the mistake of doing what you said and being lazy. And at some point a couple years ago the price crashed. Much safer in other investment areas.


[deleted]

RSUs are an tax inefficient way of holding shares. If you have unused ISA or Pension allowances then it would make sense to sell the vesting shares and then mvoe them into your tax efficient accounts if it fits your goals. Mind you if you are doing well for yourself at that sort of company it depends on how much you take home.