Every quarter, my employer’s Employee Stock Purchase Plan adds stocks to my broker account, for free. (I get stocks bought for a value of 20% of the amount I have invested during the quarter a year earlier.) I do not buy these, but I do have them in my portfolio.
I have been adding these as Delivery (Inbound), but they are counted as Invested Capital. Because of stock price fluctuation I am currently around net zero when looking at the value of the stocks I own, but how can I calculate the actual performance of this ESPP?
Exporting to CSV and filtering out the quarterly bonuses is not very efficient.
There is nothing wrong, it is invested capital and you work for it. The only difference is, that your company isn’t paying it to your bank account first. But that didn’t change anything in PP.
If you book it as an inbound delivery all is fine. If you try to bring to invest to 0, the performance would directly be unlimited.
So you just get the wrong clue from the data. If the performance is actually negative, this deal with your company was bad for you (in this moment, could of course change over time). Just now, it had be better if your company had paid it directly to you.
Thank you for your reply, but I disagree with your reasoning. Let us assume that I have been paying from my salary 20.000 for company stock over the years, and that I have received 5.000 in stock for free. The stock price goes up and down, and today its value is approximately 25.000.
If I look at the numbers in PP, this does not look like a good investment: if I had invested those 25k differently, I might have made some profit.
In reality, however, my investment of 20k resulting in 25k over a few years was not that bad: plus 20%. That is what my post is about: I would like to see the actual performance of my investment.
By the way, “Purchase value” counts these inbound transactions as well, even though there was no purchase.
as Jo92 already pointed out and as handled in several threads here on this channel the shares you get from your employer are not free shares. Most likely the reason your employer gives you some extra shares is the fact that you work for him and help him make profit. For this effort he hands you your monthly salery and once per year some shares. They easily could have given you more money per month or a bonus once a year. They decided to give you shares. This is equivalent to giving you money from which you buy the shares.
Imagine you did not have any shares before and you only got your “free” shares. What would have been the performance the next day if one share dropped by 0,01 [whateveryour currencyis] and you would have booked those shares with zero value?
Call me stubborn or even obnoxious, but I do not think you understand. This ESPP is an investment, and those free shares are more similar to a dividend paid in shares (except that it is calculated on my deposit instead of the number of shares I own) rather than a bonus or a weird form of salary.
My colleagues who choose not to participate in the ESPP do not receive any shares at all, and since I have been increasing my participation (a small percentage of my monthly salary) the number of quarterly free shares I receive goes up as well. (I swear that it is not because my employer values my work more.) There is no “most likely”: I get free shares ONLY because I bought shares the year before.
Imagine that I had been buying the exact same number of company shares via my regular broker over the years; today I would have owned 20k worth of shares. Thanks to this ESPP I have 25k worth, with the same investment.
You can call that zero performance all you want, but it is not. You can state that I somehow “worked for this capital” but I did not.
If PP let me, I would record these as dividend in stock, but I can only enter money as a dividend. As a workaround, I could enter two transactions: one with a dividend, and then another one for buying shares for the exact same amount of money, but 1/ that is not what happens (I cannot choose to spend the dividend on anything else), and 2/ very cumbersome and error-prone.
Don’t mind me, and I am sorry to bother you, but I still want to compare the performance of this ESPP to an alternative that does not pay out 20% of my previous investment.
Unfortunately I was unclear with my calculation example. I just wanted to Point out that you cannot book shares with the value zero as the performance of those will be astronomical.
In the end those extra shares are bonus shares and the most important number for PP is the amount of shares you buy, hold, or sell, so I would not mess with that.
You could book a dividend and buy new shares from exactly that amount. This of course will show up in your dividend reports. However, this way you can see if this method fits you better than simply booking those shares as inbound delivery.
These are the only ways how I see it happening. And keep in mind we all need to differentiate proper bookings from subjective perception … a scenario we observe a lot here on the forum.
