[PheonixPharts]

> hard not to regret the choice

If you can't handle "regret" in these cases, then you probably shouldn't be in a position where you're deriving the vast majority of your income/weatlh from investments (which is fundamentally what a CEO does).

It's astounding how many ICs can't wrap their heads around the concept that holding onto your RSUs make absolutely no financial sense. With rare exceptions, this doesn't make sense for anyone. And yet, fear for "regret" keeps people holding.

But it's not shocking that even in tech many ICs are not good at reasoning financially. But if you want to be a co-founder, and hold a lot of your wealth in investments it's essentially that you learn to reason, plan and accept outcomes accordingly. Otherwise you're more-or-less a professional gambler.

[molyss]

I’m going to rebound on that and explain why it doesn’t make sense to hold on to RSUs.

Disclaimer: I’m an IC myself.

I worked for my 1st company for 15 years. Held to their RSUs most of the time. Then moved to another (public) company and stayed there for a year before leaving. Now in a startup with a lower salary and no immediate liquidity on my stock options.

When you work at a public company, you have multiple exposures to the company’s growth: the RSUs that have already vested, the RSUs that haven’t vested yet and through your own career growth and salary increase that goes with a successful company. If you were early enough, you also get market cred for having made the company successful. If the companies goes under (or shrinks, or lays people off), all those assets are at risk.

Usually, one has more in granted stocks than in vested stocks. If your company just went public, you might have a lote more sellable than in your pipeline, but even that is unusual. Usually, you’ll still have more in the pipeline than you’ve already vested.

If your company has been public for a while, you should get frequent refreshes, which means you still have a significant numbers of unvested shares.

Regardless, you should sell as soon as you can, because of the remaining exposure through unvested equity. Use the proceeds to place in an ETF, or in a high-yield savings account, or some more aggressive investment strategy. Or use it for the downpayment on your house, or fund your kid’s college funds, whatever floats your boat.

Anyways, keep in mind that you still have a significant exposure to the growth of the company through your unvested equities. If you’re worried about short-term cap gain, don’t be. If you sell immediately, there’s no growth between cost basis and selling price, so no cap gain. Another upside to selling is that you’re not bound by the blackout periods, so your assets are much more liquid. And remember you still have exposure

[vl]

I would say that for most RSU lots it's better to wait for long-term capital gain taxes to kick in before selling.

[AYBABTME]

That's the incorrect belief that causes so many people to hold their RSUs. The day you vest the RSU is the day someone decided to:

   (1) give you the amount in cash (as regular income) 
   (2) take that cash and buy that stock on your behalf
   (3) turn around and give you the stock

and somehow you decide to let (2) and (3) happen without returning to the cash position in (1) and buying whatever else you would prefer to hold. The LTCG clock starts on that day, and all you're doing by holding your vested RSU is let someone else decide to buy stuff on your behalf and make the decision for you.

(that's assuming that there's an ability to liquidate the RSU on the vest date)

[kelnos]

At vesting time you are taxed (immediately) at ordinary income rates on the fair market value the day that it vests, and that's what the cost basis is set to. If you sell on that day, your capital gains from the sale will be (near) $0.

The only reason to wait for LTCG on RSUs is if you decided to hold it for some non-zero amount of time after vesting and then the stock price shot up. But then you're also taking on the risk that the stock price will drop again before the year has passed, and end up with less post-tax money than if you'd sold at short-term tax rates.

[erik_seaberg]

Some companies might make you hold for a few months until the next earnings report and trading window. After that it depends on your tolerance for risk and your attitude about the IRS.

[scruple]

How does that work?

[erik_seaberg]

Earnings reports happen once a quarter between the company and the public. A couple of business days after that, employees (without material nonpublic info) may trade company shares for the next month or so. Maybe you can't sell April shares until mid-July, and then you have to decide whether to wait until next July to minimize tax on gain.

Sometimes you can elect to sell every released share in a quarter, or file a 10b5-1 plan with a schedule, but you have to do that during a trading window.

[vonmoltke]

Most (all?) public tech companies have policies that prohibit employees from trading the company's stock outside designated windows following a quarterly earnings release.

[skybrian]

I believe in diversification and index funds for most people, but this seems overdone.

The issue here is that sometimes if you procrastinate about diversifying, it pays off very well. As a Google employee (who joined after IPO), it was by far my best investment and funded my retirement.

I guess that's accidental gambling. I did have other investments.

[nealchandra]

The way you can test if it's accidental gambling is by answering the following:

If you had worked at a different company with pure cash comp equivalent to your RSUs, would you have invested the same $$ in Google stock? Or would you have invested it instead in an aggressive but diversified portfolio (e.g. 100% S&P 500 or even just a bucket of blue-chip tech stocks).

I am confident that for the vast majority of tech employees they would choose the latter if they were operating in a pure cash regime.

[skybrian]

No, I definitely wouldn't have invested so much in Google. However, I'm not sure how much to attribute to it being a default choice, versus the differences between an inside versus an outside view.

It's easier to be comfortable investing long-term in something you know well. While there's a lot I'll never know about Google, I think I understand the company somewhat better than others. For example, I can discount a lot of news articles as being written by people who don't really understand the culture. If I hadn't worked there, I might worry more.

That's less and less true, though, as much has changed since I left. And for investment purposes, maybe that bias only seemed to be helpful, versus an outside view?

[lurking_swe]

Yes that’s accidental gambling. Or what i like to call “at the right place at the right time”.

Ask a Yahoo employee how that same plan would have worked out for them.

That being said, good for you. :)

[mgfist]

Mostly agreed, but as an employee you do have some semblance of material non-public information that gives you a structural edge in assessing the stock. (This probably works better at a 1k-5k company than a Google/FB, but I can't say because I haven't worked at the big faangs).

I've benefited financially from having a good sense of how well things are going and holding/selling accordingly (within the confines of the law and blackout periods, of course).

[panopticon]

> non-public information that gives you a structural edge in assessing the stock

This can also cut the other direction too. I had a slightly negative sentiment about Google during my tenure there due to the organization I was in. When earnings call season rolled around it didn't matter since the ads revenue line always dominated everything else.

[kelnos]

I'll agree that it's not super common that holding onto RSUs makes sense, but I think it's more common than "rare exceptions".

Ultimately it's an investing decision. If you believe the stock price is going up at a rate faster than the rest of the market, and are willing to accept the risk that a concentrated position like that entails, then that can make financial sense.

For people who want to hold their RSUs but still want to diversify to some extent, my usual recommendation is to pick some percent of the shares that vest every quarter to sell immediately, and hold the rest. And -- critically -- to stick with that commitment every single quarter, and not fall into the trap of thinking "oh, the stock seems to be doing so well, I'll skip the sale this quarter". (Of course, a measured re-evaluation of the plan is a reasonable and good thing to do every so often.)