[HN Gopher] What should you do with your stock options during a ...
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What should you do with your stock options during a recession?
Author : jrdngonen
Score : 30 points
Date : 2022-06-15 19:53 UTC (3 hours ago)
(HTM) web link (every.to)
(TXT) w3m dump (every.to)
| johnchristopher wrote:
| I'd like to know what to do with ~10 000 euros, right now. Where
| should I put it so it doesn't lose its value and keep a bit with
| inflation ?
|
| edit for a bit of context: Western Europe, renting, unlikely to
| be able to buy/invest into a house/flat, looking at gold ingots,
| not the nerve for crypto.
| senko wrote:
| Go through the videos in Plain Bagel and Common Sense Investing
| (Ben Felix) YouTube channels, then read, read the sidebar in
| r/eupersonalfinance subreddit, and that will give you solid
| foundational knowledge and context for figuring out what's best
| for you.
| nly wrote:
| Probably best to just hold on to it. Annual inflation of 10%
| sounds awful, but over short periods it's not that bad.
| wollsmoth wrote:
| I'm not sure if you can buy ibonds but those seem good for up
| to 10k usd.
|
| Otherwise, Either a targetdate fund, I use VFIFX which should
| give most benefits of a bull market while giving some cushion
| due to its diversification.
|
| Or, just a nice total market index fund should be a good
| option. It may drop a bit but it's as diversified as it gets. I
| use FZROX, but there are many others.
| bombcar wrote:
| If you're not in the US (and Euros sounds European somehow) you
| don't have access to I bonds - which would be the safest bet.
| Perhaps there is something similar?
| notch656a wrote:
| It's probably not worth the trouble, but I think anyone can
| start a US LLC and use the tax identification of that
| business to buy I-bonds.
| jonas21 wrote:
| No, only individuals can buy I-bonds.
|
| _EDIT: that 's not right. please see below._
| quesera wrote:
| This is not correct.
|
| Individuals can buy $10K/yr. Married couples can each buy
| $10K/yr, and you can buy the same amount for children.
|
| Also, businesses can buy $10K/yr, trusts can buy $10K/yr,
| and you can purchase $5K/yr with a tax refund.
|
| It would be not unusual to be able to buy $45K/yr
| (4-person household), and if one of the family is self-
| employed, $55K/yr.
|
| ....
|
| That said, don't buy lots of I bonds without first
| considering the advantages of TIPS!
| jonas21 wrote:
| Ah, you're right. I had misread this chart earlier. Sorry
| about that.
|
| https://www.treasurydirect.gov/indiv/research/indepth/ibo
| nds...
| johnchristopher wrote:
| There's something similar but it's in the .9-1.5 interest
| rate before 30% off of the interests when it's due. In Europe
| I think you can't buy bonds from another EU country but you
| can buy eurobonds (which seems to be different but are still
| emitted by EU countries).
| tmountain wrote:
| This is not financial advice, but stocks are getting cheaper
| every day. Invest into profitable companies that can weather
| the storm.
| xiphias2 wrote:
| Half year ago it would have been hard tocsay anything, but
| right now even the stock market has realistic price. (Btw I'm
| in BTC)
| JonChesterfield wrote:
| Buy something you want for 20000 and watch the debt inflate
| away?
| adamsmith143 wrote:
| This always seems silly to me. You are making an assumption
| that your Income will inflate by the same amount. But I don't
| know anyone getting 8% raises each year in any industry.
| nly wrote:
| So the theory here is if you _know_ you 're going to buy a
| $20K item in 2 years time, and you _know_ it 's going to go
| up in price in that time, you're probably better off
| borrowing the money and buying it now.
|
| The problem of course is we often don't know either of these
| things, and having better cashflow, or a pile of savings, now
| might help you weather the coming storm.
| sakopov wrote:
| Equities have been decimated. The housing market is starting to
| look like it's next. There is nowhere to hide right now.
| swagasaurus-rex wrote:
| Thank god?
| neilfrndes wrote:
| I recommend reading 'The Intelligent Investor'. The book
| describes strategies that help you navigate all kinds of
| markets.
| https://en.m.wikipedia.org/wiki/The_Intelligent_Investor.
|
| As counterintuitive as it seems, the book actually recommends
| buying stocks in a bear market since they are priced
| reasonably. Warren Buffet's famous quote comes to mind: "Be
| fearful when others are greedy, and greedy when others are
| fearful." The book also talks about the importance of long-term
| investing and discipline.
| ISL wrote:
| It may be helpful to think through your intended holding
| period.
|
| As a companion to the sibling comment recommending the
| Intelligent Investor (realize that index funds didn't exist
| when Graham wrote that), I'd keep in mind the mantra, "price is
| what you pay, value is what you get".
|
| If the holding-period is decades, there are good arguments in
| favor of stocks/index funds. Shorter-term than that, it may be
| difficult to provide guidance with any real certainty.
| FinanceAnon wrote:
| I would just hold it - I have sold most of my index fund
| holdings in the past 6-9 months and been just holding cash. I
| don't think stocks have reached the bottom yet, so holding cash
| at 0% return is still better than negative returns from stocks.
| Right now, it's about not taking losses. I also don't see the
| market and economy rebounding quickly after reaching bottom -
| they will stay flat for a while IMHO
| atombender wrote:
| As a counterpoint, I would quote the great John C Bogle:
| "Never, never get out of the market." [1] Knowing when the
| market has reached the bottom is not really possible.
|
| During the dot com crash in 2000-2001, investors sold all the
| way down to the bottom (and lots of them sold at the very
| bottom), and then they eventually sold all the way up to the
| peak, when instead they could have just held onto their
| shares.
|
| Rebalancing doesn't really work. That's another thing Bogle
| showed us.
|
| Of course, if you need the cash, that's another matter. But
| then you arguably shouldn't have invested it in the stock
| market to begin with. If you have a time horizon less than 5
| years, the market is just too volatile.
|
| [1] https://youtu.be/1SLb1QJvTvg
| ushakov wrote:
| > holding cash at 0%
|
| as consumer prices are surging this no longer may be true
|
| my bet is on physical assets: guitars, gold, watches
| subsubzero wrote:
| Gold looks ok, I don't know about guitars but watches are
| plummeting just like the stockmarket.
| justapassenger wrote:
| No one can predict the future. But generally time in market is
| more important that timing the market. Works only if you invest
| long term.
| MrMan wrote:
| In web 1.0 mine all became worthless. I went on to do other
| things than writing web apps.
| mgarfias wrote:
| article starts off talking grants, but then is talking about
| options.
|
| Pick one man, they're not the same.
| sbf501 wrote:
| Cry whilst they expire underwater? That's what I did from
| 2000-2005.
| ramesh31 wrote:
| Hope that we have another toilet paper shortage, so they get some
| use.
| meatmanek wrote:
| This article uses your net effective tax rate to calculate the
| taxes on the bargain element -- 32.25% on someone earning $150k
| in California. They should be using your _marginal_ tax rate for
| that calculation, which would be 24+9.3=33.3% on the first
| 170050-150000=$20,050 of the bargain element, 32+9.3=41.3% on the
| next 215950-170050=$45900, and 35+9.3% on the rest.
|
| Or, much easier is to use a calculator like the one they link[3],
| and calculate your total taxes on your current earnings,
| calculate total taxes on the earnings if you were to exercise,
| and then subtract.
|
| I calculate $81,599-$38,038 = $43,561 in additional taxes, rather
| than the $41,893 they said.
|
| I agree with the author's take on ISOs:
|
| > It's a bit complicated - and dry - so if you have ISOs you
| should probably talk to your tax person
|
| My opinion on ISOs is essentially that for some middle ground
| between "few enough ISOs that you don't trigger AMT" and "so many
| ISOs that the potential tax savings are more than big enough to
| pay for a financial professional", it's not worth it to try and
| exercise ISOs early.
|
| AMT on ISOs will complicate your taxes for years to come: in some
| circumstances, you can recover some of the money you paid as AMT
| on the ISOs in future years -- essentially, ISO bargain element
| is a specific category of AMT-taxable income which gives you an
| AMT credit for future years, which you can recover with form 8801
| [4]. For several years after my ISO exercise, I was able to eat
| away that credit by paying the AMT tax amount when it was _lower_
| than my standard income tax. 1.
| https://taxfoundation.org/2022-tax-brackets/ 2.
| https://www.nerdwallet.com/article/taxes/california-state-tax
| 3. https://smartasset.com/taxes/income-taxes#H3aXczXUcM 4.
| https://www.irs.gov/forms-pubs/about-form-8801
| jcdavis wrote:
| Yet another reason not to join any startup that still does 90 day
| option expiration.
| TrainedMonkey wrote:
| In US 90 day option expiration is required by law for ISOs
| which have favorable tax treatment.
| jcdavis wrote:
| Yes, but grants that convert to NSOs after departure are
| possible. Worse from a taxation perspective, but better than
| losing them.
| anon291 wrote:
| I'm planning on exercising some of mine (in the post-resignation
| 90 day period) via EquityBee. I don't want to lower my own cash
| reserves now due to a looming recession, but do believe the
| company has upside. EquityBee (and a few other companies, like
| vested, all of whom I think are legitimate) gives me money to
| exercise the options in exchange for ~30% of the shares should
| the company go public, plus repayment of the original loan. It's
| a win-win for me. The worst outcome is I make no money; the best
| is that I keep 70% of my shares without paying for them. They
| even pay AMT.
| JumpCrisscross wrote:
| > _worst outcome is I make no money; the best is that I keep
| 70% of my shares without paying for them. They even pay AMT_
|
| I don't have the details to be able to say anything useful. But
| there might be a narrow window of tax circumstances in which
| 70% of the equity without AMT but with loan costs is better
| than 100% with AMT + marginal long-term taxes and no loan
| costs. (Such schemes make sense if you're concerned about not
| being able to exercise your options on short notice after
| getting laid off. If you have the liquidity, however, set it
| aside, take the yield and hold form.)
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