Very often employees own the stock’s of their employer’s business. This usually happens in two ways. Firstly, in many cases, at least a few selected employees are offered stock of the business as an incentive or as a portion of the salary. And secondly, there are many employees who buy these stocks anyway from the market, because they are not offered the stock by the board. Here, we are taking a closer look at this second group of people.

If you are working as an employee for many years, it is not surprising that you may want to have a few stocks of the company – there are many others who feel this way because of a sense of belonging. However purely from the point of a financial investment, the issue of buying the employer’s stock is always tricky. Firstly, as the insider (even if you are not a very senior employee), you will know whether the company is doing well or not – whether what the company is offering is good or not, and whether there is a true demand for the product/service or not. You will also know about the kind of management the company has, and the kind of decisions it can take at critical junctures. Plus, you might also have access to the latest financial results, and you may have this information before the market does.

On the other hand, there are far too many people who are not objective enough when they are buying their employer’s stocks. Many people are guided by pure emotion and the desire to own a small portion of the company. There are those who are even looking to strengthen the bonding with the company by purchasing the stock. The best financial decisions cannot be taken in this way.

Planning To Buy Your Employer’s Stocks? Answer These Questions First

• What is the prospect of the industry as a whole?
• What is the company’s revenue trend?
• What is the company’s profit trend?

Industry prospects: The business cannot be bigger than the industry and if the sector is not doing well, then the business is also sure to get affected. There are some industries that depend more than others on economic booms and dooms. So find out what the industry’s prospects are.

Company’s revenue trend: Take a look at the annual reports for the last few years and find out where the company is heading. It might also be a good idea to check the reports of a few competitors as well.

Company’s profit trend: The company is doing business for the profits and as the stock owner, you will get a portion of this through dividends. So find out whether the business is profitable or not. Buying the stock may not be a good idea if the business has suffered a loss recently, as it is sure to negatively impact the stock price.

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