Master Your Employee Stock Purchase Plan

Warren Buffet once said, "Never invest in a business you cannot understand." In other words, buy what you know. Investing in enterprises and industries you possess deep knowledge can aid you as an investor. And thus, it is not uncommon for employees of companies that offer an Employee Stock Purchase Plan to participate. Investing in your company can be a substantial portion of your equity allocation. This can be especially true if the program offers an excellent discount. It is not uncommon for Employee Stock Purchase Plans (ESPPs) to allow employees to buy shares of company stock at a 5%-15% discount with after-tax dollars. Some plans can have other advantages, such as a lookback, where employees get a better deal.

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