Employer Share Purchase Plans

This all good, however as the value of the investment in the company builds up after buying the shares each and every month it can become a very significant portion of a person’s portfolio. I my case, the shares I own make up about 8% of my portfolio. This does not include the stock options I hold which could ultimately be worth 2 to 3 times my overall portfolio.

I have a portfolio rule that I have set up stating that no one position should not be more than 10% of my overall portfolio value. This ensures that I am adequately diversified and the potential negative impact of a crashing stock is minimized. It also ensures I am not too over-diversified so that gains are not lost in a sea of stocks.

This rule is going to apply to my employer shares as well. Once I hit that 10% mark I will pare down my holdings in the company and allocate the funds elsewhere. I believe this is a prudent and much safer way to manage a portfolio.