Many companies give their employees the option to engage in ESPP (employee stock purchase program/plan). The specific details vary by employer.

If your company offers ESPP at a discount then it makes sense to take advantage of it as long as you can live with the impact on cash flow. The profit from the ESPP plan can be pretty good and well worth the wait if stocks are purchased at a discount.

Here’s an example of how participating in ESPP can be beneficial. Your company may offer a discount on the purchase of stocks as part of the ESPP. If the discount is 15%, then you get a discount on your lock price (the first of a set of offering periods) or the value of the stock at closing of the last day of the ESPP period, whichever one is lower. So if you sell all of the stock immediately then a gain of 15% can be made on this investment. You’ll have to pay income tax on this gain so you won’t pocket the whole 15% but it is a great return on investment with no risk.

Investment Education