Picking the Right ESOP

by admin on August 28, 2012

Many people ask my advice about which ESOP (an abbreviation of the term employee stock ownership plan) they should choose. When most people are given the option of purchasing stock by their employer they are not sure what to do. It can be difficult to know if it is the right financial decision.

There are two main issues to consider when deciding whether to invest in an employee tax plan. The first thing to consider is diversification. Do you have your savings diversified across a range of assets? If you invest all your money in the stock plan of your company then this can actually be very risky. If your company goes bankrupt then you have not only lost your job but also all of your savings. The second thing to consider is the tax situation. Does your company have a stock plan which will limit the amount of taxes you will need to pay? If so then this can be a very good investment.

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