company stock

Should regular employees buy shares in their company’s stock?

While it might seem like a good idea to buy shares in your employer’s stock for those who work at publicly trade companies, caution is warranted. As an employee, you could be considered an “insider,” meaning any buying or selling whose timing is especially fortunate could work to your detriment later on.

Is the SEC or DOJ really likely to target the little guy? Probably not. But there’s another reason you shouldn’t put your money back into your company. If you have a non-trivial sum invested in your employer, and then your employer suddenly drops in share price, you could be faced with a double whammy: a sudden, unrealized loss of capital, and also a higher risk of layoff for budget reasons. In other words, if your employer has lost the confidence of investors, then not only have you lost money due to a drop in share price, but you also might lose your job, simply due to downsizing. Putting all of your financial eggs in one basket could easily work against you.

If your company offers a preferential stock purchase plan for employees, one that provides additional monetary incentive to invest in company shares, then it might be worth it to invest, up to an amount that you can afford. Regardless, be wary of ever executing trades while in possession of “material information” that could constitute insider trading, and be mindful of periods where transactions are prohibited. And remember, your loyalty to your employer is a great source of motivation on the job, but not a good investment strategy.

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