A SOLID OPTION?
When Enron employees lost their retirement savings because the company stock tanked, the reputation of EMPLOYEE STOCK PURCHASE PLANS tanked, too. Indeed, only about half of employees participate in their company’s plans, according to The National Center for Employee Ownership (www.nceo.org). Why buy in if you could lose everything?

Lots of reasons, actually. The problem at Enron wasn’t the plan, but the investment strategy; putting all your money in one stock is a bad idea, period. And you don’t have to hold onto the stock you buy. At many companies, you can immediately exercise your options and resell the shares — and because you buy at discounts of up to 15 percent, pocket a healthy return even after taxes.

There are disadvantages: Some companies have a mandatory holding period, during which the stock could drop even below the discounted price. And for the best tax treatment, for a qualified option, you have to hold the stock for one year from purchase and two years from the date it was offered.

Just make sure to limit your vulnerability. “Don’t invest too much of your net worth in company stock,” says David Strege, a certified financial planner with Syverson, Strege, Sandager & Co. “A good guideline is to stick to a maximum of five percent [of your total portfolio].” He also advises investor-employees to read their company’s annual report. The view from your desk might be good, but an objective look at financial statements could tell another story.