What things are important to consider when investing in one's company stock?
I would pass on their deal if they will only match if you invest in their stock.  Think about when/if the company falls on bad times. What happens to the stock of a company when bad times come? The board of directors will reduce or eliminate the dividend payout.  Current and potential investors will take notice. Current owners of the stock will sell. Potential investors will avoid buying. The price of the stock with go down. And, quite likely, the company will lay off workers.  If/when that happens you would find yourself without a job and holding (almost) worthless stock as your savings. That would be quite a bad situation to be in. "Does your job give you access to ""confidential information"", such that you can only buy or sell shares in the company during certain windows?  Employees with access to company financial data, resource planning databases, or customer databases are often only allowed to trade in company securities (or derivatives thereof) during certain ""windows"" a few days after the company releases its quarterly earnings reports.  Even those windows can be cancelled if a major event is about to be announced.  These windows are designed to prevent the appearance of insider trading, which is a serious crime in the United States. Is there a minimum time that you would need to hold the stock, before you are allowed to sell it?  Do you have confidence that the stock would retain most of its value, long enough that your profits are long-term capital gains instead of short-term capital gains? What happens to your stock if you lose your job, retire, or go to another company? Does your company's stock price seem to be inflated by any of these factors: If any of these nine warning flags are the case, I would think carefully before investing. If I had a basic emergency fund set aside and none of the nine warning flags are present, or if I had a solid emergency fund and the company seemed likely to continue to justify its stock price for several years, I would seriously consider taking full advantage of the stock purchase plan.  I would not invest more money than I could afford to lose. At first, I would cash out my profits quickly (either as quickly as allowed, or as quickly as lets me minimize my capital gains taxes).  I would reinvest in more shares, until I could afford to buy as many shares as the company would allow me to buy at the discount. In the long-run, I would avoid having more than one-third of my net worth in any single investment.  (E.g., company stock, home equity, bonds in general, et cetera.)" It appears your company is offering roughly a 25% discount on its shares.  I start there as a basis to give you a perspective on what the 30% matching offer means to you in terms of value. Since you are asking for things to consider not whether to do it, below are a few considerations (there may be others) in general you should think about your sources of income. if this company is your only source of income, it is more prudent to make your investment in their shares a smaller portion of your overall investment/savings strategy. what is the holding period for the shares you purchase. some companies institute a holding period or hold duration which restricts when you can sell the shares.  Generally, the shorter the duration period the less risk there is for you.  So if you can buy the shares and immediately sell the shares that represents the least amount of relative risk. what are the tax implications for shares offered at such a discount.  this may be something you will need to consult a tax adviser to get a better understanding.  your company should also be able to provide a reasonable interpretation of the tax consequences for the offering as well. is the stock you are buying liquid. liquid, in this case, is just a fancy term for asking how many shares trade in a public market daily. if it is a very liquid stock you can have some confidence that you may be able to sell out of your shares when you need. personally, i would review the company's financial statements and public statements to investors to get a better understanding of their competitive positioning, market size and prospects for profitability and growth. given you are a novice at this it may be good idea to solicit the opinion of your colleagues at work and others who have insight on the financial performance of the company. you should consider other investment options as well.  since this seems to be your first foray into investing you should consider diversifying your savings into a few investments areas (such as big market indices which typically should be less volatile).   last, there is always the chance that your company could fail.  Companies like Enron, Lehman Brothers and many others that were much smaller than those two examples have failed in the past.  only you can gauge your tolerance for risk. As a young investor, the best place to start is to use index funds which track a broader universe of stocks or bonds as the first step in building an investment portfolio.  once you own a good set of index funds you can diversify with smaller investments. "Check how long you have to hold the stock after buying it. If you can sell reasonably soon and your company is reasonably stable, you're unlikely to lose and/or be taxed and/or pay enough in fees to lose more than the 30% ""free money"" they're giving you.  Whether you hold it longer than the minimum time depends partly on whether you think you can better invest the money elsewhere, and partly on how you feel about having both your salary and (part of) your investments tied to the company's success? The company would like you to ""double down"" that way, in the theory that it may make you mors motivated... but some investment councelors would advise keeping that a relatively small part of your total investments, basically for the same reasons you are always advised to diversify." You really have asked two different questions here: I'm interested in putting away some money for my family Then I urge you to read up on investing. Improving your knowledge in investing is an investment that will very likely pay off in the long-term - this can't be answered here in full length, pointers to where to start are asset allocation and low-cost index funds. Read serious books, read stackexchange posts, and try avoid the Wall Street marketing machine. Also, before considering any long term investments, build an emergency fund (e.g. 6 months worth of your expenses) in case you need some liquid money (loss of job etc.), and also helps you sleep better at night. What things are important to consider before making this kind of investment? Mainly the risk (other answers already elaborate on the details).  Investing in a single stock is quite risky, even more so when your income also depends on that company. Framed another way: which percentage of your portfolio should you put into a single stock? (which has been answered in this post). If after considering all things you think it's a good deal, take the offer, but don't put a too great percentage of you overall savings into it, limit it to say 10% (maybe even less).
"Think about the implications if the world worked as your question implies that it ""should"":  A $15 share of stock would return you (at least) $15 after 3 months, plus another $15 after 6 months, plus another after 9 and 12 months.  This would have returned to you $60 over the year that you owned it (plus you still own the share).  Only then would the stock be worth buying?  Anything less than $60 would be too little to be worth bothering about for $15? Such a thing would indeed be worth buying, but you won't find golden-egg laying stocks like that on the stock market.  Why?  Because other people would outbid your measly $15 in order to get this $60-a-year producing stock (in fact, they would bid many hundreds of dollars).  Since other people bid more, you can't find such a deal available. (Of course, there are the points others have brought up: the earnings per share are yearly, not quarterly, unless otherwise noted.  The earnings may not be sent to you at all, or only a small part, but you would gain much of their value because the company should be worth about that much more by keeping the earnings.)" "Wouldn't this be part of your investing strategy to know what price is considered a ""good"" price for the stock?  If you are going to invest in company ABC, shouldn't you have some idea of whether the stock price of $30, $60, or $100 is the bargain price you want?  I'd consider this part of the due diligence if you are picking individual stocks.  Mutual funds can be a bit different in automatically doing fractional shares and not quite as easy to analyze as a company's financials in a sense. I'm more concerned with the fact that you don't seem to have a good idea of what the price is that you are willing to buy the stock so that you take advantage of the volatility of the market. ETFs would be similar to mutual funds in some ways though I'd probably consider the question that may be worth considering here is how much do you want to optimize the price you pay versus adding $x to your position each time.  I'd probably consider estimating a ballpark and then setting the limit price somewhere within that.  I wouldn't necessarily set it to the maximum price you'd be willing to pay unless you are trying to ride a ""hot"" ETF using some kind of momentum strategy.  The downside of a momentum strategy is that it can take a while to work out the kinks and I don't use one though I do remember a columnist from MSN Money that did that kind of trading regularly." Each situation is different, but it has to do with assessing what the Company is trying to do. People always talk about WACC, but in reality, WACC is less important than figuring how how much debt a Company can support (determined by leverage and solvency statistics).  Here are a few things to think about:  -How stable are the Company's cash flows? (big difference between a Company that has multi-year contracts locked in place vs. variable/cyclical revenue streams; what type of Capex requirement is there?)  -What is the purpose of raising the capital? (growth vs. recapitalization; where are the proceeds going?)  -What collateral is available for creditors?  -What does working capital look like? (is there seasonality?) Pick one stock (probably within Utilities) and know it well. Understand what it trades on (EV / EBITDA, P / E, P / Rev) and why. What are the typical margins for the industry? What are rev growth trends? What isn't priced in? I think studying one company deeply would be helpful  Other things to look at would be how your fund is structured, what it's benchmark is, voting structure, and how ideas are sourced  Good luck! The worth of a share of stocks may be defined as the present cash value of all future dividends and liquidations associated therewith.  Without a crystal ball, such worth may generally only be determined retrospectively, but even though it's generally not possible to know the precise worth of a stock in time for such information to be useful, it has a level of worth which is absolute and not--unlikely market price--is generally unaffected by people buying and selling the stock (except insofar as activities in company stock affect a company's ability to do business). If a particular share of stock is worth $10 by the above measure, but Joe sells it to Larry for $8, that means Joe gives Larry $2.  If Larry sells it to Fred $12, Fred gives Larry $2.  The only way Fred can come out ahead is if he finds someone else to give him $2 or more.  If Fred can sell it to Adam for $13, then Adam will give Fred $3, leaving Fred $1 better off than he would be if he hadn't bought the stock, but Adam will be $3 worse off. The key point is that if you sell something for less than it's worth, or buy something for more that it's worth, you give money away.  You might be able to convince other people to give you money in the same way you gave someone else money, but fundamentally the money has been given away, and it's not coming back. "I primarily intend to add on to WBT's answer, which is good. It has been shown that ""momentum"" is a very real, tangible factor in stock returns. Stocks that have done well tend to keep doing well; stocks that are doing poorly tend to keep doing poorly. For a long-term value investor, of course fundamental valuation should be your first thing to look at - but as long as you're comfortable with the company's price as compared to its value, you should absolutely hang onto it if it's been going up. The old saying on Wall Street is ""Cut your losses, and let your winners ride."" As WBT said, there may be some tangible emotional benefit to marking your win while you're ahead and not risking that it tanks, but I'd say the odds are in your favor. If an undervalued company starts rising in stock price, maybe that means the market is starting to recognize it for the deal it is. Hang onto it and enjoy the fruits of your research." "No, the stock market is not there for speculation on corporate memorabilia.  At its base, it is there for investing in a business, the point of the investment being, of course, to make money.  A (successful) business earns money, and that makes it valuable to its owners since that money can be distributed to them.  Shares of stock are pieces of business ownership, and so are valuable.   If you knew that the business would have profit of $10,000,000 every year, and would distribute that to the owners of each of its 10,000,000 shares each year, you would know to that each share would receive $1 each year.  How much would such a share be worth to you?  If you could instead put money in a bank and get 5% a year back, to get $1 a year back you would have to put $20 into the bank.  So maybe that share of stock is worth about $20 to you.  If somebody offers to sell you such a share for $18, you might buy it; for $23, maybe you pass up the offer. But business is uncertain, and how much profit the business will make is uncertain and will vary through time.  So how much is a share of a real business worth?  This is a much harder call, and people use many different ways to come up with how much they should pay for a share.  Some people probably just think something like ""Apple is a good company making money, I'll buy a share at whatever price it is being offered at right now.""  Others look at every number available, build models of the company and the economy and the risks, all to estimate what a share might be worth, more or less.  There is no indisputable value for a share of a successful business. So, what effect does a company's earnings have on the price of its stock?  You can only say that for some of the people who might buy or sell shares, higher earnings will, all other thing being equal, have them be willing to spend more to buy it or demand more when selling it.  But how much more is not quantifiable but depends on each person's approach to the problem.  Higher earnings would tend to raise the price of the stock.  Yet there are other factors, such as people who had expected even higher earnings, whose actions would tend to lower the price, and people who are OK with the earnings now, but suspect trouble for the business is appearing on the horizon, whose actions would also tend to lower the price. This is why people say that a stock's price is determined by supply and demand." "None of that is filtered my way as a ""part owner"". Sure it is, it's just not always obvious. When a company makes money it either: Other then the fourth option, the first three all increase the total value of the company.  If you owned 1% of a company that was worth X, and is now worth X+1, the value of that 1% ownership should go up as well. One model of the value of a share of stock is the present value of all future cash flows that the company produces for its shareholders, which would be either through dividends, earnings (provided that they are invested back into the company) or through liquidation (sale).  So as earnings increase (or more accurately as projected future earnings increase), so does the value of a share of the company. Also note that the payment of dividends causes the price of a stock to go down when the dividend is paid, since that's equity (cash) that's leaving the company, reducing the value of the company by an equivalent amount. Of course, there's also something to be said for the behavioral aspect of investing, meaning that people sometimes invest in companies that they like, and sell stock of companies that they don't like or disagree with (e.g. Nordstrom's)." "This is several questions wrapped together: How can I diplomatically see the company's financial information? How strong a claim does a stockholder or warrantholder have to see the company's financials? What information do I need to know about the company financials before deciding to buy in? I'll start with the easier second question (which is quasi implicit).  Stockholders typically have inspection rights.  For example, Delaware General Corporate Law § 220 gives stockholders the right to inspect and copy company financial information, subject to certain restrictions. Check the laws and corporate code of your company's state of incorporation to find the specific inspection right.  If it is an LLC or partnership, then the operating agreement usually controls and there may be no inspection rights.  If you have no corporate stock, then of course you have no statutory inspection rights.  My (admittedly incomplete) understanding is that warrantholders generally have no inspection rights unless somehow contracted for.  So if you vest as a corporate stockholder, it'll be your right to see the financials—which may make even a small purchase valuable to you as a continuing employee with the right to see the financials.  Until then, this is probably a courtesy and not their obligation. The first question is not easy to answer, except to say that it's variable and highly personal for small companies.  Some people interpret it as prying or accusatory, the implication being that the founders are either hiding something or that you need to examine really closely the mouth of their beautiful gift horse.  Other people may be much cooler about the question, understanding that small companies are risky and you're being methodical.  And in some smaller companies, they may believe giving you the expenses could make office life awkward. If you approach it professionally, directly, and briefly (do not over-explain yourself) with the responsible accountant or HR person (if any), then I imagine it should not be a problem for them to give some information.  Conversely, you may feel comfortable enough to review a high-level summary sheet with a founder, or to find some other way of tactfully reviewing the right information. In any case, I would keep the request vague, simple, and direct, and see what information they show you.  If your request is too specific, then you risk pushing them to show information A, which they refuse to do, but a vague request would've prompted them to show you information B.  A too-specific request might get you information X when a vague request could have garnered XYZ.  Vague requests are also less aggressive and may raise fewer objections. The third question is difficult to say.  My personal understanding is some perspective of how venture capitalists look at the investment opportunity (you didn't say how new this startup is or what series/stage they are on, so I'll try to stay vague). The actual financials are less relevant for startups than they are for other investments because the situation will definitely change.  Most venture capital firms like to look at the burn rate or amount of cash spent, usually at a monthly rate.  A high burn rate relative to infusions of cash suggests the company is growing rapidly but may have a risk of toppling (i.e. failing before exit).  Burn rate can change drastically during the early life of the startup.  Of course burn rate needs the context of revenues and reserves (and latest valuation is helpful as a benchmark, but you may be able to calculate that from the restricted share offer made to you).  High burn rate might not be bad, if the company is booming along towards a successful exit. You might also want to look at some sort of business plan or info sheet, rather than financials alone.  You want to gauge the size of the market (most startups like to claim 9- or 10-figure markets, so even a few percentage points of market share will hit revenue into the 8-figures).  You'll also have to have a sense for the business plan and model and whether it's a good investment or a ridiculous rehash (""it's Twitter for dogs meets Match.com for Russian Orthodox singles!"").  In other words, appraise it like an investor or VC and figure out whether it's a prospect for decent return.  Typical things like competition, customer acquisition costs, manufacturing costs are relevant depending on the type of business activity. Of course, I wouldn't ignore psychology (note that economists and finance people don't generally condone the following sort of emotional thinking).  If you don't invest in the company and it goes big, you'll kick yourself.  If it goes really big, other people will either assume you are rich or feel sad for you if you say you didn't get rich.  If you invest but lose money, it may not be so painful as not investing and losing out the opportunity.  So if you consider the emotional aspect of personal finance, it may be wise to invest at least a little, and hedge against ""woulda-shoulda"" syndrome.  That's more like emotional advice than hard-nosed financial advice. So much of the answer really depends on your particular circumstances.  Obviously you have other considerations like whether you can afford the investment, which will be on you to decide.  And of course, the § 83(b) election is almost always recommended in these situations (which seems to be what you are saying) to convert ordinary income into capital gain.  You may also need cash to pay any up-front taxes on the § 83(b) equity, depending on your circumstances." Don't start by investing in a few individual companies. This is risky. Want an example? I'm thinking of a big company, say $120 billion or so, a household name, and good consistent dividends to boot. They were doing fairly well, and were generally busy trying to convince people that they were looking to the future with new environmentally friendly technologies. Then... they went and spilled a bunch of oil into the Gulf of Mexico. Yes, it wasn't a pretty picture if BP was one of five companies in your portfolio that day. Things would look a lot better if they were one of 500 or 5000 companies, though. So. First, aim for diversification via mutual funds or ETFs. (I personally think you should probably start with the mutual funds: you avoid trading fees, for one thing. It's also easier to fit medium-sized dollar amounts into funds than into ETFs, even if you do get fee-free ETF trading. ETFs can get you better expense ratios, but the less money you have invested the less important that is.) Once you have a decent-sized portfolio - tens of thousands of dollars or so - then you can begin to consider holding stocks of individual companies. Take note of fees, including trading fees / commissions. If you buy $2000 worth of stock and pay a $20 commission you're already down 1%. If you're holding a mutual fund or ETF, look at the expense ratio. The annualized real return on the stock market is about 4%. (A real return is after adjusting for inflation.) If your fee is 1%, that's about a quarter of your earnings, which is huge. And while it's easy for a mutual fund to outperform the market by 1% from time to time, it's really really hard to do it consistently. Once you're looking at individual companies, you should do a lot of obnoxious boring stupid research and don't just buy the stock on the strength of its brand name. You'll be interested in a couple of metrics. The main one is probably the P/E ratio (price/earnings). If you take the inverse of this, you'll get the rate at which your investment is making you money (e.g. a P/E of 20 is 5%, a P/E of 10 is 10%). All else being equal, a lower P/E is a good thing: it means that you're buying the company's income really cheap. However, all else is seldom equal: if a stock is going for really cheap, it's usually because investors don't think that it's got much of a future. Earnings are not always consistent. There are a lot of other measures, like beta (correlation to the market overall: riskier volatile stocks have higher numbers), gross margins, price to unleveraged free cash flow, and stuff like that. Again, do the boring research, otherwise you're just playing games with your money. "I think you've got basics, but you may have the order / emphasis a bit wrong. I've changed the order of the things you've learned in to what I think is the most important to understand: Owning a stock is like owning a tiny chunk of the business Owning stock is owning a tiny chunk of the business, it's not just ""like"" it. The ""tiny chunks"" are called shares, because that is literally what they are, a share of the business. Sometimes shares are also called stocks. The words stock and share are mostly interchangeable, but a single stock normally means your holding of many shares in a business, so if you have 100 shares in 1 company, that's a stock in that company, if you then buy 100 shares in another company, you now own 2 stocks. An investor seeks to buy stocks at a low price, and sell when the price is high. Not necessarily. An investor will buy shares in a company that they believe will make them a profit. In general, a company will make a profit and distribute some or all of it to shareholders in the form of dividends. They will also keep back a portion of the profit to invest in growing the company. If the company does grow, it will grow in value and your shares will get more valuable. Price (of a stock) is affected by supply/demand, volume, and possibly company profits The price of a share that you see on a stock ticker is the price that people on the market have exchanged the share for recently, not the price you or I can buy a share for, although usually if people on the market are buying and selling at that price, someone will buy or sell from you at a similar sort of price. In theory, the price will be the companies total value, if you were to own the whole thing (it's market capitalisation) divided by the total number of shares that exist in that company. The problem is that it's very difficult to work out the total value of a company. You can start by counting the different things that it owns (including things like intellectual property and the knowledge and experience of people who work there), subtract all the money it owes in loans etc., and then make an allowance for how much profit you expect the company to make in the future. The problem is that these numbers are all going to be estimates, and different peoples estimates will disagree. Some people don't bother to estimate at all. The market makers will just follow supply and demand. They will hold a few shares in each of many companies that they are interested in. They will advertise a lower price that they are willing to buy at and a higher price that they will sell at all the time. When they hold a lot of a share, they will price it lower so that people buy it from them. When they start to run out, they will price it higher. You will never need to spend more than the market makers price to buy a share, or get less than the market makers price when you come to sell it (unless you want to buy or sell more shares than they are willing to). This is why stock price depends on supply and demand. The other category of people who don't care about the companies they are trading are the high speed traders. They just look at information like the past price, the volume (total amount of shares being exchanged on the market) and many other statistics both from the market and elsewhere and look for patterns. You cannot compete with these people - they do things like physically locate their servers nearer to the stock exchanges buildings to get a few milliseconds time advantage over their competitors to buy shares quicker than them." Every listed company needs to maintain book of accounts, when you are investing in companies you would have to look at what is stated in the books and along with other info decide to invest in it. While on the surface it might not make sense to pay more than one dollar to get just one dollar back, the key thing is that a good company's earnings are recurring each year. So, you wouldn't just be paying for the $1 dollar of earnings per share this year, but for the entire future stream of earnings per share, every year, in perpetuity -- and the earnings may grow over time too (if it remains a good company.) Your stock is a claim on a portion of the company's future. The brighter and/or more certain that future, the more investors are willing to pay for each recurring dollar of earnings. And the P/E ratio tells you, in effect, how many years it might take for your investment to earn back what you paid – assuming earnings remain the same. But you would hope the earnings would grow, too. When a company's earnings are widely expected to grow, the P/E for the stock is often higher than average. Bear in mind you don't actually receive the company's earnings, since management often decides to reinvest all or a portion of it to grow the company. Yet, many companies do pay a portion of earnings out as dividends. Dividends are money in your pocket each year. Good questions. I can only add that it may be valuable if the company is bought, they may buy the options. Happened to me in previous company. Patrick, This article points out three likely effects (direct and indirect) sovereign default can have on the individual: http://tutor2u.net/blog/index.php/economics/comments/the-sovereign-default-option-is-costly/ This looks at how a default may not look like a default - even if it is. But again, how defaults can impact the man in the street: http://online.wsj.com/article/SB10001424052748703323704574602030789251824.html The fascinating Argentine default is described in a blow-by-blow format here, including brief references to things like unemployment and personal savings: http://theinflationist.com/sovereign-default/argentine-sovereign-default-2002-argentina-financial-crisis Remember, though. Not all defaults are the same. And a modern-European country's default may look very different to what has occurred elsewhere.