Hi, I was wondering how you deal with constantly changing stock prices from the company you work at. I saw a video from @Rahul where he talked about the mistake to check stock prices at the beginning of each day or something. Not sure anymore where he said it. @Rahul @Alex I was wondering how you dealt with your stocks constantly changing in value.
I've been experimenting with Big Tech stocks and find myself constantly looking at them. I wonder how people in Big Tech deal with that with the stocks they receive from the company. Do they sell when they think it's going bad and turn it into cash, or just keep them for the long run? How often do they check their stocks? How to they deal with the constantly fluctuating prices?
I saw a video from @Rahul where he talked about the mistake to check stock prices at the beginning of each day or something.
I think this is from our compensation masterclass: [Masterclass] Understanding And Optimizing Your Pay In Tech
I was wondering how you deal with constantly changing stock prices from the company you work at.
Simple: You only check the price during trading windows (assuming you're ready to sell). There's 0 point checking outside of these windows because even if the price is high/low, you don't have any power to act anyways. The tricky part is resisting temptation to check the share price, haha (it's just so juicy!).
I wonder how people in Big Tech deal with that with the stocks they receive from the company.
This is a very common topic among FAANG engineers (we talked about this around the "water cooler" all the time at Meta, haha), and there's 3 broad patterns I have seen:
If you want to learn more about how FAANG works, we gave a masterclass on that too: [Masterclass] Should You Work At FAANG? - What Big Tech Is Like For Software Engineers
Assume you're at a public company that gives you X RSUs as part of compensation. One way to think about the decision to sell or not is:
If I had cash on hand, would I actively choose to buy X RSUs right now?
If the answer is no (it will be for most people), the rational thing to do is to sell all your vested stock and diversify. Of course, very few people do this, either out of laziness or because they think the stock will still go up.
In terms of handling stock price fluctuations, one thing that really helps me is to realize that the stock price is out of your control. For the vast majority of engineers in Big Tech, there's very little they can do to impact the company stock. Why worry when you're helpless? 😅
(I also talk about the stress associated with checking stock prices in this LinkedIn post.) It's easy to feel anxious when so much of your comp is tied to company performance (e.g. the 5 offers I got as a new grad).
Why do you care? You have no control over day to day price fluctuations. 99% of the time the transactions are just quants who are following value at risk models or rebalancing based on modern portfolio theory formulas.
Every price action is a vote, a random action based on some reasoning you don't know about. If people vote for some insane proposition based on some insane reason, you wouldn't follow them. For instance, if someone buys a share of Google just because he thinks dogs are superior animals to cats, you would call him nuts. Yet that's effectively what every price action is: a price is just a vote on what the asset is worth and a buyer and seller have exchanged money for the asset.
Why do you care about something you don't control and don't influence and can't understand? Price is just an opportunity to buy or sell the stock because other people are buying and selling.
I made a LOT of money simply by holding my stock (and concentrating my wealth in 2 positions), not caring what the stock price did, and sitting on my ass just trying to be better at my job. It works out way better too: you'll make way more money and life is way more fun. What's more important to you? Stock rising 5% or getting promoted 1 year faster? You'll make more money in the latter. Plus, you have complete control over.
In full disclosure, a good chunk of my net worth is still in Apple or Apple-exposed positions.
My personal take is that I don't think engineers should ever have been compensated in RSUs to begin with. Stocks represent ownership in a business and most employees don't think about the business or the quality of the business. They see it as a trading instrument just because someone else will buy it at a higher price and they have no idea how to actually trade.
It is absolute madness to me that people who has no financial training and can't read a 10k care so much.
If you seriously are suffering from FOMO, I suggest doing 3 things:
As a rebuttal to the "just sell and diversify in index funds", I think that's great advice for average people. But I found Munger's approach far more intuitive and I naturally was doing it anyway because I understood value investing.
“I think it’s much easier to find five than it is to find 100,” the 97-year-old investor argued. “I think the people who argue for all this diversification, by the way, I call it “diworsification”. And I’m way more comfortable owning two or three stocks which I think I know something about and where I think I have an advantage.”