While tech stocks have been all over the place the last few years, there’s a common response that stays consistent whether prices are up or down: just wait a while.
We heard it in late 2021: “The stock market and my company stock are at an all-time high. I think they’ll keep climbing . . . I’ll keep my company stock a little while longer.” (That was just before the stock market, and many tech stocks in particular, started their unexpected descent beginning the first trading day of the new year.)
The same hopeful thoughts can be heard today, one year later, but with a twist: “My company stock has really dropped. I think it will go back up, though . . . I’ll hold on to it a little while longer.”
Will those holding on now see their company stock rise again? They might and they might not. The stock might keep going down, if the company can’t execute on its vision or its customers decide to stop buying for whatever reason.
Public stock markets are extremely good at processing all available information and coming up with a current company value that all market participants agree on. If there was news or data out there that indicated the stock price should be higher, it would have gone up—people who believe the company is more valuable than the current market price would have offered to buy its stock at a higher share price from the people who don’t.
We simply can’t predict what that company stock will do going forward. And it’s not enough to simply hope it goes in the more lucrative direction. When it comes to managing your company stock, whether in the form of restricted stock units (RSUs), non-qualified stock options (NSOs), incentive stock options (ISOs), or other types of share grants, hope is not an optimal strategy.
Instead, maybe it’s time to decouple your finances from tech’s financial roller coaster and be more in control of your future.
Tech industries (including biotech and life sciences) can be a place of abundance, creating enormous value and tremendous opportunity. Think of fire, the wheel, paper, the printing press, steam power, cars, airplanes, antibiotics, vaccines, electricity, transistors, computers, software, the Internet, mobile phones, and social media. These innovations created massive new industries and tremendous amounts of wealth. Machine learning, artificial intelligence, and robotics are doing the same before our eyes. Upcoming and over-the-horizon technologies, such as low-latency edge computing, blockchain-enabled distributed finance, genetic medicine, quantum computing, and fusion energy, have similar promise.
The work in these areas can be incredibly engaging. And having a career with a higher purpose, to advance humankind in some way, can be fulfilling. But not all ideas and companies work out; the landscape is littered with dead companies and failed ideas. You have to pick your way through them.
Given the inherently volatile nature of a career in tech, often the best way through it is to take your winnings when they come, tuck them away, get them safe and growing, and then move on to the next company or project. Usually that means having an intention and a plan to diversify some or all of your company stock into a more predictable mix of investments that will continue to grow over time. The idea is to consolidate your earnings at each career stop along the way and then continue exploring for new opportunities in this ample area.
With all the opportunities available, a career in tech can certainly position you well for long-term financial success. But you will still need a comprehensive strategy for taking control of your finances and building lasting wealth.
You may have already done that, and holding on to your company stock is a part of your plan. But if instead your approach is to just wait and hope for the best, now would be a great time to get your finances in order and be ready to capitalize on the next set of opportunities.
It’s never too late to start.
Parkworth Wealth Management provides holistic wealth management services including financial planning, equity compensation planning, investment management, tax planning, and others, on a fee-only basis and as a fiduciary, acting in clients’ best interests. If you’d like to take control of your finances and get on a path to building lasting wealth, schedule a complimentary consultation.
