What's the value of an ESPP?

Hi everyone –

My company has an employee stock purchase plan. I can put up to 10% of my salary into it. The company will then purchase the stock at a 15% discount on either the offering date or purchase date, whichever is lower. Pretty standard.

I put in 10% of my salary because I look at the 15% discount as extra salary. So even if I sell all my shares on the first day I get them, I still get that 15% boost. But, if I sell them right away I will be taxed on the short term gains…

So, based on the tenets of PFC, when would you choose to sell your ESPP shares? Do I sell them immediately and then put that money into my indexes? Or do I wait the 1.5 years (2 years after offering date) to sell so that I pay the long term capital gains tax rather than the short term tax? Or do I sell off some and keep the rest??

Of course this depends on my risk aversion, but I like to base this on historical returns and logic if possible. The short term vs long term gains tax isn’t HUGE, so maybe the risk of waiting the 1.5 years isn’t worth it. Would love to know what you guys think.

NOW – plot twist!! … My fiancé “only” gets a 5% discount from her ESPP. What’s the PFC advice on how she should handle this? Should she still put in 10% of her salary and sell her shares on the first day so she doesn’t lose the 5%? Or should she put in less of her salary or wait longer because of the tax implications?

If you made it this far, thank you! Love the content and community here!