Imagine if your financial adviser came to you with a secure (and legal) way to get a guaranteed 50% return on your money. You’d likely say ‘yes’ pretty quickly. Well, no need to imagine any longer, because that’s exactly what you can get if you’re lucky enough to have a share ownership plan at work.
Brock McEwen, a director at Great West Life, says that with his company’s plan, for every $2 of Great West Life stock he buys, the company throws in $1, effectively creating that 50% return on his money—even if the stock price doesn’t go up. “We’re getting tremendous value,” he says.
Bob Gorman, vice-president and chief portfolio strategist with TD Waterhouse, agrees these types of programs can be a boon. Generally, people can invest between 1% and 5% a paycheque in their employer’s stock. Simply doing that, Gorman explains, can net you high returns.
But there are risks. Some plans lock in your money for while, and having a pension, a job, and investments tied up in one place can be dangerous. “Enron,” utters Ted Rechtshaffen of TriDelta Financial, recalling the disaster its employees faced when the company went bust. The staff not only lost their jobs, but the savings they had in the share ownership plan.
To avoid that scenario, Rechtshaffen says you should keep abreast of your employer’s financial situation, and you shouldn’t have more than 50% of your net worth tied up in your company. “If it exceeds that,” he says, “it may be necessary to get more balance, even if there are great benefits.” Baby boomers nearing retirement should be especially careful of putting all their eggs in one basket.
In McEwen’s case, he says his company appears to be stable, and for him it’s not just about the money. “Imagine being one of the only execs sitting around a table who didn’t invest,” he says. “I want to support my company.”