Many people want to invest in the stock market but feel like it’s out of reach. Between everyday expenses, debt and rising costs of living, it can seem impossible to set aside enough money to start investing. But what if your employer already offered you a built-in way to do it and even threw in a discount?
That’s exactly what an Employee Stock Purchase Plan (ESPP) does. It’s a benefit available at many U.S. companies, yet millions of workers overlook it every year.
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“An ESPP is a plan that allows you to buy shares of your company stock, typically at a discount,” said Chad Gammon, CFP and enrolled agent at Custom Fit Financial. “You choose ahead of time how much you will contribute to purchase for a period of time, and then at the end of the period you buy the stock. The discount can be 10% to 15% off the market price.”
That discount alone can create instant gains, and over time, those gains can add up to serious wealth.
An ESPP lets employees purchase company stock through payroll deductions, a couple of times per year, at a discounted price. For example, if your company’s plan offers a 15% discount and the stock is trading at $100 per share, you can buy it for $85.
Gammon explained that the math works in your favor even if the stock dips.
“Let’s say your company offers a 15% discount and the stock at the beginning of the period is $100 per share. If the stock at the end of the period is $110 per share, you are still buying the stock at $85 per share,” he said. “If at the end of the period the stock price is $90, then you get 15% off the $90 price, or $76.60 per share. Ideally, the stock goes up and you get a larger gain, but even if the stock price goes down, it can still make sense.”
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So what kind of returns can an average worker…
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