How to Get Off Tech’s Financial Roller Coaster
Whether tech stocks are at all-time highs or in the middle of a downturn, the response from employees holding company stock tends to be the same: just wait a while.
When stocks are soaring, the thinking is, “They’ll keep climbing. I’ll hold on a little longer.” When stocks have dropped, the thinking flips, but the conclusion doesn’t change: “They’ll bounce back. I’ll hold on a little longer.”
Will those holding on see their company stock rise again?
They might and they might not. The stock might keep going down if the company can’t execute on its vision or its customers decide to stop buying for whatever reason.
Public stock markets are extremely good at processing much of the publicly available information and coming up with a current company value that many market participants agree on. If there were news or data out there that indicated the stock price should be higher, it would have gone up. People who believe the company is more valuable than the current market price would have offered to buy its stock at a higher share price than those who don’t.
We simply can’t predict what that company stock will do in the future. And it’s not enough to simply hope it goes in a more lucrative direction. When it comes to managing your company stock, whether in the form of restricted stock units (RSUs), non-qualified stock options (NSOs), incentive stock options (ISOs), or other types of share grants, hope is not an optimal strategy.
Instead, maybe it’s time to decouple your finances from tech’s financial roller coaster and take a more intentional, risk-aware approach to your financial decisions over time.
Tech industries (including biotech and life sciences) can be a place of abundance, creating enormous value and tremendous opportunity. Think of fire, the wheel, paper, the printing press, steam power, cars, airplanes, antibiotics, vaccines, electricity, transistors, computers, software, the Internet, mobile phones, and social media. These innovations created massive new industries and tremendous amounts of wealth. Machine learning, artificial intelligence, and robotics are doing the same before our eyes. Upcoming and over-the-horizon technologies, such as low-latency edge computing, genetic medicine, quantum computing, and fusion energy, have similar promise.
The work in these areas can be incredibly engaging. And having a career with a higher purpose, to advance humankind in some way, can be fulfilling. But not all ideas and companies work out; the landscape is littered with dead companies and failed ideas. You have to pick your way through them.
Given the inherently volatile nature of a career in tech, often the best way through it is to evaluate diversification opportunities when gains occur and reinvest thoughtfully, and then move on to the next company or project. Usually, that means having an intention and a plan to diversify some or all of your company stock into a more diversified investment mix aligned with your goals and risk tolerance. The idea is to consolidate your earnings at each career stop along the way and then continue exploring for new opportunities in this ample area.
With all the opportunities available, a career in tech can certainly position you well for long-term financial success. But you will still need a comprehensive strategy for taking control of your finances and building lasting wealth.
You may have already done that, and holding on to your company stock is a part of your plan. But if instead your approach is to just wait and hope for the best, now would be a great time to get your finances in order and be ready to capitalize on the next set of opportunities.
It’s never too late to start.
Savant Wealth Management provides holistic wealth management services including financial planning, equity compensation planning, investment management, tax planning, and others, on a fee-only basis and as a fiduciary, acting in clients’ best interests. If you’d like to discuss your financial goals and explore planning strategies tailored to your situation, schedule a complimentary consultation.
This is intended for informational purposes only. You should not assume that any discussion or information contained in this document serves as the receipt of, or as a substitute for, personalized investment advice from Savant. Please consult your investment professional regarding your unique situation.
Bruce R. Barton
Managing Partner / Financial Advisor
CFP®, CFA®, MBA