Navigating Stock Volatility: A Tech Employee's Guide
Discover the impact of stock volatility on your career as a tech employee and learn how to manage the risks associated with restricted stock units (RSUs).
As a tech employee, you may be aware that a portion of your compensation package includes restricted stock units (RSUs). These RSUs are a form of equity compensation that give you the right to own a certain number of shares in the company you work for, but with certain restrictions.
However, as an RSU holder, you should also be aware of the concept of stock volatility and why it matters to you.
In this article, we will explain what stock volatility is, how it affects the value of your RSUs, and what steps you can take to manage the risks associated with it.
What is Stock Volatility?
Stock volatility refers to the fluctuation in the price of a stock over time. It is a measure of how much the price of a stock can change, either up or down, in a given period of time.
Volatility is often measured by the standard deviation of the stock's returns, which is a statistical measure that shows how much the returns deviate from the average. The higher the volatility, the greater the deviation from the average.
How it Affects RSUs
The value of your RSUs is directly tied to the value of the underlying stock. If the stock price is volatile, the value of your RSUs will also be volatile. This means that the value of your RSUs can change rapidly and unpredictably, which can make it difficult to plan for your financial future. Additionally, if the value of your RSUs decreases significantly, you may be faced with the decision to hold on to them in the hope that they will recover, or to sell them at a loss.
Moreover, stock volatility can also affect the timing of when you can sell your RSUs. Many RSUs have a vesting period, during which time you cannot sell them. If the stock price is volatile during this period, it may result in your RSUs being worth significantly less when you are finally able to sell them.
Managing Risks
One of the ways to manage the risks associated with stock volatility is to diversify your investments. By spreading your investments across different asset classes, sectors, and companies, you can reduce your exposure to the risks associated with any one particular investment.
Another way to manage the risks associated with stock volatility is to use a strategy called dollar-cost averaging. This strategy involves investing a fixed amount of money at regular intervals, regardless of the price of the stock. By doing this, you will purchase more shares when the price is low and fewer shares when the price is high, which can help to smooth out the impact of stock volatility on your investments.
Finally, it's important to have a well-diversified portfolio with a mix of short-term and long-term investments. This can help you to manage the risks associated with stock volatility, while also allowing you to achieve your financial goals.
Picking a Job During Periods of High Stock Volatility
Stock volatility can also have an impact on your decision-making when you choose a job. For example, if you are considering a job offer from a company with a highly volatile stock, you may be hesitant to accept the offer if you are relying on your RSUs as a significant portion of your compensation package. The volatility of the stock can affect the value of your RSUs, making it more uncertain about your future financial security.
Additionally, if you are considering a job change, the volatility of the company's stock may make you more cautious about leaving a stable job for one with more volatility. It's important for you to consider the volatility of a company's stock when making decisions about job opportunities and weigh the potential risks and benefits.
Consult with a Professional
It's important to remember that managing the risks associated with stock volatility is a complex task that requires a thorough understanding of the markets and your own risk tolerance. Therefore, it's recommended to consult with a financial advisor or investment professional to help you develop a strategy that is right for you. They can help you to understand the risks associated with stock volatility and develop a plan to manage them.
The information provided herein is for general informational purposes only and is not intended to provide tax, legal, or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation of any security by Candor, its employees and affiliates, or any third-party. Any expressions of opinion or assumptions are for illustrative purposes only and are subject to change without notice. Past performance is not a guarantee of future results and the opinions presented herein should not be viewed as an indicator of future performance. Investing in securities involves risk. Loss of principal is possible.
Third-party data has been obtained from sources we believe to be reliable; however, its accuracy, completeness, or reliability cannot be guaranteed. Candor does not receive compensation to promote or discuss any particular Company; however, Candor, its employees and affiliates, and/or its clients may hold positions in securities of the Companies discussed.