I am almost sure that Philip is a Boglehead (are you?) Just out of curiosity, is the $26M net of cumulative gains from investing the vested $1.4M?
Regardless, this is very sound advice to give to most people (regression to the mean, as always). I do think that sometimes crazy people just want to gamble, and some of them will get lucky. The threshold (i.e., $20M in the bank) is quite arbitrary, too. Some might need just $1-2M to get by and will be comfortable with gambling any bonus they earn through RSUs.
1. Apologies for a math error. It actually is $48M, not the original $26M I published, due to forgetting that the lockup period allowed me to only sell when FB was $21. Pointed out to me by alert reader Justin Mitchell.
What's tough with this type of post is that the people who already reason accurately don't need it, and the people who don't tend to have difficulty opening their minds to understand it. The perils of persuasion...
Trying to convince others who have different risk tolerance than you is not very productive in my opinion :) (if it were this easy, there shouldn't be too many day traders or specialized ETFs in the market).
For this particular context of startup RSUs, the irony is I also have that thought (i.e., if you don't believe in the company that you want to hold the RSU, you shouldn't work there). How I make peace with the thought is recognizing that the decision to sell your RSUs when you vest comes down to 3 things: your risk tolerance, your financial principles, and where you are in your financial journey i.e., do you have $20M in the bank ;)
As of Jul 2025, I would sell my RSUs and invest that bonus in a well diversified index fund. This might not be the case anymore when I have $20M in the bank and become an angel investor myself.
Your comment already shows you don't need this post. 😂
* $26M is not net of gains relative to investing
* Agreed 100% that some people just want to gamble — and I think that's totally fine, as long as they are consciously doing so (as opposed to thinking of vested RSUs as house money that's somehow "free").
* Only suggested $20M as a rough way to say, "I don't think more than 5% of your investments should ever be in one single stock." Agreed completely that one can live on far, far less.
Is the key not to just sell, but to outperform the RSUs with the cash you now hold (presumably in the market)? Is your article just a different way of saying bet on the entire market (index funds) instead of individual stocks? Because liquidating RSUs is step 1, but you never go into step 2 (what to do with the cash). Because just holding 1.4m of cash instead of 1.4m of ACME certainly isn't the correct answer, either. Nonetheless, great read and appreciate your perspective
(And David — anyone with the clarity of what you’ve articulated regarding the opportunity cost of the money doesn’t need this post. I’m sure with your mindset that you’re already doing all the right things.)
It of course matters what you do with the money — eg selling and then burning all of it would, in many cases, be worse.
But not in all — and that’s the key. Too many people assume their hot startup’s stock can only go up. Nearly nobody, behaviorally, acts like it can go to zero. Because if it can (and it can), even holding as cash is far, far smarter.
Thanks David. I came here to ask exactly this question.
Here's the counter-reasoning I have heard: Hold the stock because you are betting on the financial decisions of Acme (or another tech company) than your own financial decision of either keeping that cash in a high yield savings account or buying SPY/VOO.
So it isn't just about selling the stock. It is about actively managing that money. Carving out time out of your schedule to learn about, manage, and track finances is work. So most people just end up putting that unto recurring index funds.
@Philip Any plans for a follow-up article on what to do after you sell?
Manisha - I don't think holding onto the stock as a way to rely on Acme's financial decision-making is necessary (even if it was a good idea, which I'm not sure it is) because your unvested stock is already dependent on that (i.e. you are already "long" on the stock implicitly... and by an amount which, for most people, represents a decent chunk of their future wealth).
I'm not planning a follow-up on what to do with the money after you sell, primarily because the internet already has a boatload of (often conflicting) advice around that. This Hasan Minhaj video summarizes the basics of what I believe: https://youtu.be/V360AygOv7A?si=4_9H-bZoDqIRgOna. But there are a whole host of others on the internet who'd have wildly differing opinions.
I agree with the premise, but I think a clearer example that drives the point home (for me at least) is if Bob:
1. Gets a $500k cash bonus
2. Uses the full bonus to buy ACME stock
Wdyt?
Easier for me to reason about when it's viewed as a liquid payment that you can either hold in cash or hold in stock.
When I think of it this way, it's easier to see why holding RSUs, simply because that's the form they were paid in, doesn't make sense if you wouldn't have done the same with an equivalent cash bonus.
Yes, exactly. But so many people cannot bring themselves to see these as equivalent, at least in my experience.
It’s like the experiment where they asked one population how much they’d pay for a mug, and then asked the second population how much they’d sell the mug for after giving it first to them. The latter value the mug more highly, even though they’re in the same situation as the former.
I fully agree that everyone should sell on vest, but what about the act of accepting a job offer with RSUs in the first place?
Employees who have accepted a job offer with payment in RSUs have already agreed that part of their pay is going to be invested in the company stock for a specified amount of time before they are able to liquidate it and make use of the proceeds. Everyone who got a job offer with RSUs had the opportunity to consider whether this holding period is acceptable to them. Those that found it unacceptable went to work for companies that pay cash only with no deferred compensation. Among those that found it acceptable, surely for some people their intended holding period could be longer than whatever the company’s mandated schedule is?
Sure, one doesn’t really get paid RSUs until they vest, but entirely ignoring the concentration from unvested RSUs and the investment choices that are made _when they accepted a job with RSU grants_ also seems wrong?
Absolutely. I have bought competitors' stock upon joining a company for this reason alone. I believe in the company I join far more than the competitor, but I want to hedge my concentration in unvested RSUs by buying the competitor (in cases where there's a clear battle where one or the other company will likely win).
And what you say about holding the stock is also right, and in line with what I'm advising: people don't need to sell when they would have went on the open market and bought the same amount of shares anyway.
I imagine that the vast majority of employees wouldn’t have bought the RSUs (or some substitute that’s close enough, like the underlying stock) on the open market with their money, but they accept it as pay, because they have some belief about the future valuation of the underlying stock. Sure, some people value all RSUs at $0, but I don’t think that is very common.
Given these 2 otherwise identical job offers:
- company A: $100K/yr cash and $100K/yr RSU,
- company B: $110K/yr cash,
Would you say that it only makes sense to accept the job offer from company A if you were going to buy at least $10K/yr of its stock if you didn’t accept it?
I'm not sure I follow the logic of that example. LMK what you think about this example:
- Amy vests $10k of Acme and holds it
- Amy doesn't vest any RSUs at all, and buys $10k of Acme on the market
I believe those two are equivalent scenarios (i.e. there is nothing truly different about them). What I'm contending is that most people who hold RSUs would never buy that amount of the same stock with cash if they didn't have the RSUs.
Sure, they are equivalent, and what you’re saying makes total sense.
What I’m saying is that most people who accept being paid in RSUs would never buy a similar security in similar amounts on the market if they were paid cash. Therefore accepting RSUs as payment is similar (though not exactly the same) as keeping RSUs after they vest.
Thanks for the article. I first read about this topic from Andre Nader!
On an unrelated note, do you or any reader have experience investing in commercial real estate (syndication)? It’s commonly pitched as a group of investors pulling money together to buy an asset (e.g. commercial real estate in this case).
I myself don't have any experience investing in commercial real estate, or with real estate syndicates. My complete n00b guess would be that commercial REITs might be the easiest way to dabble without a bunch of hassle. I'm happy to learn from other readers who might comment — it's not a space I've thought much about.
Absolutely. At least if your ESPP program is like Microsoft's, where you can buy up to something like 15% of your salary in company stock, and when you vest 6 months later, you get the lower of two prices: the market price on the first day of the period, or the price on the last day. This is an absolutely risk-free way of making money.
However, as with the rest of this post, I think it's a mistake to hold ESPP a day longer than when you vest, unless you were going to buy that much stock on the open market anyway. Same reasons as in this post. I think it's especially a big mistake that many people want to hold the stock to pay long-term cap gains vs. short-term. The savings are known/understood (i.e. the difference between those two tax brackets); what's unknown is the downside risk you're taking on in order to try to save that amount of money. People conveniently forget, for instance, that MSFT went from $119 to $40 in the space of a few months, and stayed below $119 for the subsequent SEVENTEEN years.
Can you say more about how those help? My (basic) understanding of RSUs is that they're taxed as ordinary income at market price the day of vesting — how would those swaps avoid that?
i like the first principles thinking but there are several factors. At the first principle. level, when you work in the company you have a good sense of how the company is doing in terms of their future roadmap. And tht is an information assymetry that outside folks with cash will not have.
Also there are tax implications. Most people who have built asymmetrical wealth take a mix of asymettric. infromation, risk and having a strong bullish thesis. Maybe for the aeverage joe its a lot of work but its something in today's age every employee should be taking advantage of when they are still employees.
I completely buy that an insider may have better insight into future growth of the company. If that's the case, and you would buy your company's stock on the open market for the same amount of money, then it makes sense to hold the RSUs (and actually buy even more on the open market, since the odds are extremely slim that the exact shares of RSUs you vested are identical to what you would have felt justified buying on the open market).
I'm not sure I understand how taxes are involved in this decision, though. Aren't RSUs taxed as ordinary income? In which case, holding or selling immediately aren't any different, right?
Yes selling immediately makes no difference so you are right.. However if you are looking to build wealth and reduce tax burden there are many vehicles like exchange funds that can come off tax efficient while still reducing risks. It only applies when you are finally ready to pull the trigger.
I think this is also about regret minimization and daydreaming. "What if" the stock goes up 10x? My friends would expect me to be a multi millionaire but I would look stupid.
Just for that, I guess you could do something like sell 85%, keep 15%.
Say you work at Acme, but your good friend Amy works at Hooli. In addition to the 15% Acme RSUs you hold to minimize regret, should you also buy 15%'s worth of Hooli to minimize the possible regret that Hooli might 10x?
I haven't met a single person who does that, though I've met many who make the regret-minimization argument.
I think the strongest form of my argument might say that if someone feels regret when RSUs they sold 10x'd later, they're actually suffering from hindsight bias or being result-oriented (in the poker sense of that phrase). FB stock has literally 34x'd since I sold my initial RSUs — and I don't feel an ounce of regret.
However, on the "daydreaming" front, I totally support doing this if you would equally have bought the same amount of stock on the open market using cash from your bank account. If you'd indeed do that, holding 15% as a dice-roll is completely rational.
That said, I have rarely, if ever, known of a coworker who took money from their bank to buy even more shares of their company's stock. The disparity between the number of people who hold RSUs vs. the number who buy the same stock using cash is the irrationality I'm trying to suggest is out there.
Oh for sure I totally agree. I'm in your camp haha. The example you gave here in my opinion is slightly off because my friends won't care if I didn't buy Hooli (I don't work there) but it's funny if I *sold* Acme while working there.
But logically it's still flawed, so yes. Sell 100%.
This is a really practical and interesting perspective. Definitely helpful as I’m about to be in a similar situation where equity will be a significant part of my compensation.
One hesitation I have about selling vested RSUs immediately is the potential for unfavorable tax treatment. I understand that everyone's appetite for risk is different. How have you thought about balancing the short-term tax hit with the potential for longer-term gains?
1. RSUs are taxed as income when vested, so tax shouldn’t factor in.
2. Even if taxes did factor in (eg for people who are tempted to hold ESPP until it’s long-term capital gains), it’s letting the tail wag the dog if you hold the tremendous risk of something in hopes of reducing taxes. You could think of it as borrowing the market value of the stock at a rate equal to the tax you expect to save — your actions have the same (leveraged) consequences. (But once again, for RSUs, tax shouldn’t even factor in)
I am almost sure that Philip is a Boglehead (are you?) Just out of curiosity, is the $26M net of cumulative gains from investing the vested $1.4M?
Regardless, this is very sound advice to give to most people (regression to the mean, as always). I do think that sometimes crazy people just want to gamble, and some of them will get lucky. The threshold (i.e., $20M in the bank) is quite arbitrary, too. Some might need just $1-2M to get by and will be comfortable with gambling any bonus they earn through RSUs.
Two updates:
1. Apologies for a math error. It actually is $48M, not the original $26M I published, due to forgetting that the lockup period allowed me to only sell when FB was $21. Pointed out to me by alert reader Justin Mitchell.
2. Arguments like these continue to pop up: https://www.linkedin.com/feed/update/urn:li:activity:7346213602090995712?commentUrn=urn%3Ali%3Acomment%3A%28activity%3A7346213602090995712%2C7346333665959809024%29&dashCommentUrn=urn%3Ali%3Afsd_comment%3A%287346333665959809024%2Curn%3Ali%3Aactivity%3A7346213602090995712%29.
What's tough with this type of post is that the people who already reason accurately don't need it, and the people who don't tend to have difficulty opening their minds to understand it. The perils of persuasion...
Trying to convince others who have different risk tolerance than you is not very productive in my opinion :) (if it were this easy, there shouldn't be too many day traders or specialized ETFs in the market).
For this particular context of startup RSUs, the irony is I also have that thought (i.e., if you don't believe in the company that you want to hold the RSU, you shouldn't work there). How I make peace with the thought is recognizing that the decision to sell your RSUs when you vest comes down to 3 things: your risk tolerance, your financial principles, and where you are in your financial journey i.e., do you have $20M in the bank ;)
As of Jul 2025, I would sell my RSUs and invest that bonus in a well diversified index fund. This might not be the case anymore when I have $20M in the bank and become an angel investor myself.
Your comment already shows you don't need this post. 😂
* $26M is not net of gains relative to investing
* Agreed 100% that some people just want to gamble — and I think that's totally fine, as long as they are consciously doing so (as opposed to thinking of vested RSUs as house money that's somehow "free").
* Only suggested $20M as a rough way to say, "I don't think more than 5% of your investments should ever be in one single stock." Agreed completely that one can live on far, far less.
* I am a big Bogle fan.
Haha one Bogle recognizes another ;) well said!
Is the key not to just sell, but to outperform the RSUs with the cash you now hold (presumably in the market)? Is your article just a different way of saying bet on the entire market (index funds) instead of individual stocks? Because liquidating RSUs is step 1, but you never go into step 2 (what to do with the cash). Because just holding 1.4m of cash instead of 1.4m of ACME certainly isn't the correct answer, either. Nonetheless, great read and appreciate your perspective
(And David — anyone with the clarity of what you’ve articulated regarding the opportunity cost of the money doesn’t need this post. I’m sure with your mindset that you’re already doing all the right things.)
It of course matters what you do with the money — eg selling and then burning all of it would, in many cases, be worse.
But not in all — and that’s the key. Too many people assume their hot startup’s stock can only go up. Nearly nobody, behaviorally, acts like it can go to zero. Because if it can (and it can), even holding as cash is far, far smarter.
Thanks David. I came here to ask exactly this question.
Here's the counter-reasoning I have heard: Hold the stock because you are betting on the financial decisions of Acme (or another tech company) than your own financial decision of either keeping that cash in a high yield savings account or buying SPY/VOO.
So it isn't just about selling the stock. It is about actively managing that money. Carving out time out of your schedule to learn about, manage, and track finances is work. So most people just end up putting that unto recurring index funds.
@Philip Any plans for a follow-up article on what to do after you sell?
Manisha - I don't think holding onto the stock as a way to rely on Acme's financial decision-making is necessary (even if it was a good idea, which I'm not sure it is) because your unvested stock is already dependent on that (i.e. you are already "long" on the stock implicitly... and by an amount which, for most people, represents a decent chunk of their future wealth).
I'm not planning a follow-up on what to do with the money after you sell, primarily because the internet already has a boatload of (often conflicting) advice around that. This Hasan Minhaj video summarizes the basics of what I believe: https://youtu.be/V360AygOv7A?si=4_9H-bZoDqIRgOna. But there are a whole host of others on the internet who'd have wildly differing opinions.
I agree with the premise, but I think a clearer example that drives the point home (for me at least) is if Bob:
1. Gets a $500k cash bonus
2. Uses the full bonus to buy ACME stock
Wdyt?
Easier for me to reason about when it's viewed as a liquid payment that you can either hold in cash or hold in stock.
When I think of it this way, it's easier to see why holding RSUs, simply because that's the form they were paid in, doesn't make sense if you wouldn't have done the same with an equivalent cash bonus.
Yes, exactly. But so many people cannot bring themselves to see these as equivalent, at least in my experience.
It’s like the experiment where they asked one population how much they’d pay for a mug, and then asked the second population how much they’d sell the mug for after giving it first to them. The latter value the mug more highly, even though they’re in the same situation as the former.
Yup, loss aversion bias is very real. Even knowing about it, hard to avoid tbh haha
It's kinda silly to talk about Microsoft's stock price without mentioning dividends.
I fully agree that everyone should sell on vest, but what about the act of accepting a job offer with RSUs in the first place?
Employees who have accepted a job offer with payment in RSUs have already agreed that part of their pay is going to be invested in the company stock for a specified amount of time before they are able to liquidate it and make use of the proceeds. Everyone who got a job offer with RSUs had the opportunity to consider whether this holding period is acceptable to them. Those that found it unacceptable went to work for companies that pay cash only with no deferred compensation. Among those that found it acceptable, surely for some people their intended holding period could be longer than whatever the company’s mandated schedule is?
Sure, one doesn’t really get paid RSUs until they vest, but entirely ignoring the concentration from unvested RSUs and the investment choices that are made _when they accepted a job with RSU grants_ also seems wrong?
Absolutely. I have bought competitors' stock upon joining a company for this reason alone. I believe in the company I join far more than the competitor, but I want to hedge my concentration in unvested RSUs by buying the competitor (in cases where there's a clear battle where one or the other company will likely win).
And what you say about holding the stock is also right, and in line with what I'm advising: people don't need to sell when they would have went on the open market and bought the same amount of shares anyway.
I imagine that the vast majority of employees wouldn’t have bought the RSUs (or some substitute that’s close enough, like the underlying stock) on the open market with their money, but they accept it as pay, because they have some belief about the future valuation of the underlying stock. Sure, some people value all RSUs at $0, but I don’t think that is very common.
Given these 2 otherwise identical job offers:
- company A: $100K/yr cash and $100K/yr RSU,
- company B: $110K/yr cash,
Would you say that it only makes sense to accept the job offer from company A if you were going to buy at least $10K/yr of its stock if you didn’t accept it?
I'm not sure I follow the logic of that example. LMK what you think about this example:
- Amy vests $10k of Acme and holds it
- Amy doesn't vest any RSUs at all, and buys $10k of Acme on the market
I believe those two are equivalent scenarios (i.e. there is nothing truly different about them). What I'm contending is that most people who hold RSUs would never buy that amount of the same stock with cash if they didn't have the RSUs.
Sure, they are equivalent, and what you’re saying makes total sense.
What I’m saying is that most people who accept being paid in RSUs would never buy a similar security in similar amounts on the market if they were paid cash. Therefore accepting RSUs as payment is similar (though not exactly the same) as keeping RSUs after they vest.
Thanks for the article. I first read about this topic from Andre Nader!
On an unrelated note, do you or any reader have experience investing in commercial real estate (syndication)? It’s commonly pitched as a group of investors pulling money together to buy an asset (e.g. commercial real estate in this case).
I myself don't have any experience investing in commercial real estate, or with real estate syndicates. My complete n00b guess would be that commercial REITs might be the easiest way to dabble without a bunch of hassle. I'm happy to learn from other readers who might comment — it's not a space I've thought much about.
Thank you for the reply!
Would you say the same thing for ESPP? Not RSUs? If not, any other strategies you followed?
Absolutely. At least if your ESPP program is like Microsoft's, where you can buy up to something like 15% of your salary in company stock, and when you vest 6 months later, you get the lower of two prices: the market price on the first day of the period, or the price on the last day. This is an absolutely risk-free way of making money.
However, as with the rest of this post, I think it's a mistake to hold ESPP a day longer than when you vest, unless you were going to buy that much stock on the open market anyway. Same reasons as in this post. I think it's especially a big mistake that many people want to hold the stock to pay long-term cap gains vs. short-term. The savings are known/understood (i.e. the difference between those two tax brackets); what's unknown is the downside risk you're taking on in order to try to save that amount of money. People conveniently forget, for instance, that MSFT went from $119 to $40 in the space of a few months, and stayed below $119 for the subsequent SEVENTEEN years.
At those dollar values (8 figures), your tax hit would be huge. You'd be a candidate for an equity index swap or total return swap.
Can you say more about how those help? My (basic) understanding of RSUs is that they're taxed as ordinary income at market price the day of vesting — how would those swaps avoid that?
i like the first principles thinking but there are several factors. At the first principle. level, when you work in the company you have a good sense of how the company is doing in terms of their future roadmap. And tht is an information assymetry that outside folks with cash will not have.
Also there are tax implications. Most people who have built asymmetrical wealth take a mix of asymettric. infromation, risk and having a strong bullish thesis. Maybe for the aeverage joe its a lot of work but its something in today's age every employee should be taking advantage of when they are still employees.
Neat points, Bobby. Thanks for bringing them up.
I completely buy that an insider may have better insight into future growth of the company. If that's the case, and you would buy your company's stock on the open market for the same amount of money, then it makes sense to hold the RSUs (and actually buy even more on the open market, since the odds are extremely slim that the exact shares of RSUs you vested are identical to what you would have felt justified buying on the open market).
I'm not sure I understand how taxes are involved in this decision, though. Aren't RSUs taxed as ordinary income? In which case, holding or selling immediately aren't any different, right?
Yes selling immediately makes no difference so you are right.. However if you are looking to build wealth and reduce tax burden there are many vehicles like exchange funds that can come off tax efficient while still reducing risks. It only applies when you are finally ready to pull the trigger.
I think this is also about regret minimization and daydreaming. "What if" the stock goes up 10x? My friends would expect me to be a multi millionaire but I would look stupid.
Just for that, I guess you could do something like sell 85%, keep 15%.
Say you work at Acme, but your good friend Amy works at Hooli. In addition to the 15% Acme RSUs you hold to minimize regret, should you also buy 15%'s worth of Hooli to minimize the possible regret that Hooli might 10x?
I haven't met a single person who does that, though I've met many who make the regret-minimization argument.
I think the strongest form of my argument might say that if someone feels regret when RSUs they sold 10x'd later, they're actually suffering from hindsight bias or being result-oriented (in the poker sense of that phrase). FB stock has literally 34x'd since I sold my initial RSUs — and I don't feel an ounce of regret.
However, on the "daydreaming" front, I totally support doing this if you would equally have bought the same amount of stock on the open market using cash from your bank account. If you'd indeed do that, holding 15% as a dice-roll is completely rational.
That said, I have rarely, if ever, known of a coworker who took money from their bank to buy even more shares of their company's stock. The disparity between the number of people who hold RSUs vs. the number who buy the same stock using cash is the irrationality I'm trying to suggest is out there.
Ya I'd rather let my index funds give me the exposure I need.
Oh for sure I totally agree. I'm in your camp haha. The example you gave here in my opinion is slightly off because my friends won't care if I didn't buy Hooli (I don't work there) but it's funny if I *sold* Acme while working there.
But logically it's still flawed, so yes. Sell 100%.
Oh, 100%. Great point. Yes, you'll be laughed at, just as I have routinely — all the time — been laughed at.
This is a really practical and interesting perspective. Definitely helpful as I’m about to be in a similar situation where equity will be a significant part of my compensation.
One hesitation I have about selling vested RSUs immediately is the potential for unfavorable tax treatment. I understand that everyone's appetite for risk is different. How have you thought about balancing the short-term tax hit with the potential for longer-term gains?
1. RSUs are taxed as income when vested, so tax shouldn’t factor in.
2. Even if taxes did factor in (eg for people who are tempted to hold ESPP until it’s long-term capital gains), it’s letting the tail wag the dog if you hold the tremendous risk of something in hopes of reducing taxes. You could think of it as borrowing the market value of the stock at a rate equal to the tax you expect to save — your actions have the same (leveraged) consequences. (But once again, for RSUs, tax shouldn’t even factor in)