How should I manage my stock compensation?

Get smart with your stock! The decision to sell your stock, or keep your stock, often revolves around the tax impact of an exercise or sale. Though the tax impact is important, our viewpoint is that the tax should not drive the decision to exercise or sell. In fact, we believe in an alternative decision-making process:

What is the measured risk of the current stock holding? Even if the stock has some upside, what could you be giving up (e.g. fulfilling another, more immediate short-term goal) by holding onto the stock? The performance return of the stock is important, but understanding at what expense (i.e. the risk) is just as, if not more, important in evaluating the stock.

What alternatives do you have with the stock? By selling your stock, can you achieve a financial goal? If you hold onto the stock, are there ways to protect the stock (e.g. margin, hedging, etc.)? Understanding the pros and cons of the various alternatives is important.

Oftentimes, it won’t be just one strategy, but a combination of various strategies. Only until understanding the measured risk and the alternatives, then can you definitively evaluate the tax impact of a decision, and create a plan on how to mitigate any projected taxes.