The Google Employee Trading Plan is a 10b5-1 plan that allows you to set up a trading program outside of the annual trading windows. It also helps alleviate the pressure to sell at the right time or to need to make a decision every time the stock vests.
The trading plan starts with a cooling off period where you cannot sell stock for a few months and then goes into action in August. The plan will continue until July the following year.
There are many options within the Google Employee Trading Plan for selling prior vested GSUs and future vestings (starting with August). If you do decide to sell prior vested GSUs, there will be an option of which shares to sell and how to sell them. Two of those options are FIFO and LIFO. FIFO means selling the shares you first received long ago and still hold. This will sell long term held GSUs. LIFO will sell shares most recently vested. Prioritizing recently vested shares may result in short term capital gains that are taxed at higher tax rates.
What should I consider?
When you are thinking about whether to opt into the plan, a few factors to consider are:
- Company performance
- Stock volatility
- Need for diversification
- Trading plan restrictions
- Your financial plan
Below are a few of the thoughts we take into consideration of our clients when reviewing whether the plan is helpful for them.
Why opt into the Google Employee Trading Plan?
Company performance: If you don’t believe in forecasting or don’t know what to expect, then you may want to capture it systemically. You may also review trends and see that the stock tends to drop after trading windows open for employees.
Stock volatility: If the changes in stock value makes it hard to sell, you may want to opt in to the trading program to reduce decision fatigue.
Need for diversification: If the majority of your net worth is from vesting GSUs, then you may wish to diversify your portfolio or add liquidity. Trading windows would restrict when you could use the money.
Trading plan restrictions: If you live in a more expensive place, you may need to use some shares for mortgage payments and living expenses. A trading program using VWAP will allow you to receive the cash from each RSU vesting on a monthly basis to align with your spending and savings.
Your financial plan: Opting in will allow you to build a snowball of selling shares and putting the cash towards your investments and life goals. This may mean saving more towards a home, expanding your family, supporting parents, or leaning into investing in owning your time in the future.
Why not opt into the Google Employee Trading Plan?
Company performance: If you think Google is riding the wave of AI, user growth, and is going to kill it this year, then you may believe in timing a sale. You may decide to review financial performance and news after each trading window opens up to determine what you want to do.
Stock volatility: If you prefer to attempt to ‘game’ the volatility and sell on a local high within the trading windows, then you may want more control than a trading plan offers.
Need for diversification: If you prefer to take the risk of maintaining your career and investment portfolio all with one entity.
Trading plan restrictions: If you don’t need the shares for living expenses or an upcoming purchase. Or, you may want the opportunity to change your mind on selling previously vested GSUs through the year.
Your financial plan: If your financial philosophy is about placing big bets in the hope for big returns and grinding until that point, then you may not see a need to opt in. Caution: this is more of a speculative decision than a financial plan.
Our recommendation
When you want to streamline your finances and add clarity to your life, a trading plan frees you emotionally and timing wise. You are able to flex your financial freedom muscles knowing each month you are getting closer to your financial goals and a stable future.
The employee trading program can be freeing for most financial plans. You are able to take the compensation you’ve earned and use it towards investing in yourself, your family, and your long term success.
That is our philosophy. What is yours? What is money’s purpose in your life?
If you are looking for a thought partner in your financial life, schedule a chat with us.
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The above discussion is for informational purposes only. Recommendations are of a general nature, not based on knowledge of any individual’s specific needs or circumstances, and there is no intent to provide individual investment advisory, supervisory or management services.
