The Amex Stock Dilemma
As an executive at American Express, you have likely accumulated shares of stock through the awards of restricted shares, stock options and by investing in shares within the RSP. You may now find yourself with a significant portion of your assets invested in the company stock.
The Amex Stock
And why not? American Express is a remarkable company. For 175 years, Amex has been a global leader, employing over 75,000 people worldwide. It’s one of only 30 companies in the Dow Jones Industrial Average and a core holding in Warren Buffett’s investment portfolio. Over the past five years, the shares have risen 147%, and with reinvested dividends, total shareholder return has been closer to 204%.
The Risk of Overconcentration
However, there are risks that you should be aware of. No company, no matter how iconic, is immune to trouble. History is filled with examples of once-great companies that collapsed. Some recent examples include Enron, Lehman Brothers, Blockbuster. When those companies fell, employees lost their jobs, and many saw their retirement savings devastated because so much of their wealth was tied to company stock.
Without realizing it, you may have a bias that makes it difficult to recognize these risks.
As a long-term employee, you know the company well and that feeling makes you feel safe and protected. Any suggestion of selling shares of the company can feel like you're betting against the home team or even betting against your own success.
Think Ahead
Astute investors understand that to make good financial decisions, emotions must be removed from the process. They also know that past performance is no indication of future results and that you shouldn’t put all your eggs in one basket.
So have you asked yourself?
How much of your total assets are tied to American Express shares
What would happen to your financial position if the company ran into serious trouble
Next Steps
The first thing you should do is to assess your assets and investment holdings and determine how much is directly and indirectly (via Restricted shares and Options) invested in American Express stock. If you find yourself heavily concentrated in Amex stock, you should not panic or sell everything at once.
There are several steps that can be taken to address the issue, while still participating in the future success of the company. As usual, there is no simple solution. A plan can be structured that takes into consideration your personal and career goals, tax situation and tolerance for risk. If you are wondering how this may impact you and want to take pro-active steps to address this, please schedule a complimentary consultation today!
