Hey there! Im a tech engineer at Amazon and a large portion of my compensation comes in the form of AMZN stock. Amazon stock has done spectacularly over the years, however, Im wondering if it would be more optimal for me to sell these stocks as they vest and then reinvest them into a S&P 500 index fund. One caveat I think worth considering here is wether or not I ought to sell them immediately upon receipt OR should I wait a year to sell them to avoid the short term capital gains tax of 30% in my case.
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Since the stock money doesn’t seem to be needed and you’re going to invest it anyway, i personally would bank on Amazon stock not going down 30% in a year and save on the taxes. Even if the stock does tank below 30% over the year it’s still money you weren’t planning on using but investing anyway.
Not sure taking the 30% hit is a wrong answer though to get an extra year of compounding. Especially if the market ends up going to bear.
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Since the short-term vs. long-term cap gains tax difference is 15% here, I think of it as having 15% downside protection in a sense. Both seem like valid routes so its been a bit ambiguous. Thanks for your input Chad! Much appreciated.
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I agree there isn’t really a slam dunk correct answer here without knowing the future. And if you DID know the future, it would have everything to do with what happens to Amazon stock, not the taxes.
In general, there’s a saying that you shouldn’t “let the tail wag the dog”. i.e. don’t do something to optimize a tax situation if it’s the wrong investment in the first place. I might look to the 90/10 rule and try to have 90% of your portfolio in index funds. If you’re like 50% Amazon, it’s probably worth taking less tax optimal route to get yourself more diversified. If Amazon stock drops 80%, you’ll be glad you did!
If you’re within that 10% (or maybe even 20% if you’re bending the rule) I might just do a rolling window so when it hits long term cap gains tax status, sell it, and keep everything else for a year. And I’d always keep a healthy chunk. So if Amazon stock does go up 10X you don’t feel like a turd for selling it all.
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Thanks a ton Jeremy! your a legend sir
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