What is Google ETP and Should You Opt In?
When it comes to managing your Google RSUs (also known as GSUs), it’s essential to consider the rules and programs that can maximize your returns. One of the popular ways to make decisions about the sale of your stock units is to opt into the Google Employee Trading Plan (ETP).
What exactly is this plan and how can you benefit from it? In this guide, we’ll break down the basics so you can make the best decision for your lifestyle and portfolio.
What is the Google Employee Trading Plan?
The Google Employee Trading Plan (ETP) is similar to a 10b5-1 plan that permits insiders to sell their company stock without violating any of the stringent insider trading laws. Google’s ETP plan eliminates the pressure to sell in an optimal window or whenever Google’s stock units vest.
How does the Employee Trading Plan at Google work?
With the ETP, you’ll set up your specific predetermined trading strategies upfront, which then automatically execute in the coming year, regardless of your trading window being open or closed. Once enrolled in this plan, your GSUs will automatically sell on the vesting date.
Essentially, the ETP plan is a predetermined automatic selling plan. If you’re looking for more customization, the 10b5-1 plan allows for more stipulations like limit orders on a specific number of shares.
For Google specifically, the trading plan is initiated and then stocks must be held for a few months. Your ETP goes into effect in August and lasts almost one full calendar year until July of the next year.
In addition to selling your shares under a specific timeline, you can also set up a core strategy of what to do with your previously vested GSUs. You can sell the shares that were vested first if you’re still holding onto them (known as FIFO). Alternatively, you can sell those that have just vested (known as LIFO) but this may incur short-term capital gains taxes.
Factors to Consider Before Opting into Google ETP
Deciding to opt into the Google ETP requires a lot of planning and careful consideration. Here are five criteria you should think about before opting in:
Company Performance: It’s difficult to predict accurately where a stock price will go. The ETP helps you capture the value of your shares on vest vs waiting until a trading window opens to sell, which may result in a higher or lower price.
Stock Volatility: Is the current market stable or volatile? Google’s ETP takes away some of the time and energy associated with making a quick decision in a constantly fluctuating stock market.
Diversification: How diverse is your current portfolio? If a large portion of your net worth is tied up in your GSUs, the ETP might help.
Trading Plan Restrictions: Do you rely on GSUs to cover living expenses? They’re a major part of your long-term compensation plan, and setting up this type of trading plan gives you cash when GSUs vest monthly.
Financial Plan: Do you have any upcoming moves in your financial plan, such as paying off a home, starting a family, or caring for aging relatives? Google’s ETP allows you to easily sell your shares and prepare for these milestones.
Pros and Cons of Opting into Google ETP
After thinking about some of the considerations that might impact your decision, let’s take a closer look at some of the program’s pros and cons. The best move will depend on your unique situation and how the change will impact your portfolio and lifestyle.
Pros of Google ETP
Systematic Selling
No matter what your criteria are for selling, there’s a systematic way to approach the market. You can drastically reduce your decision fatigue with the guidelines set up in the Google ETP. Instead of having to make a unique decision every time the market fluctuates, the system can decide for you and free up your energy to spend elsewhere.
Monthly Cash
Many people who work for Google rely on the value of their vested GSUs to cover monthly living expenses. You might want to allow your vesting to align with your expenses, giving you more financial freedom to pay your bills and live comfortably in the here and now.
While you may not be betting on big returns, this can be a more stable source of income for you.
Diversification and Liquidity
If you hold mostly GSUs in your portfolio, it might be time to branch out. Selling your shares allows you to reinvest that money in other assets or add more liquidity to your portfolio. This could be a savvy financial move to protect you from too much risk.
Cons of Google ETP
Limits Timing Opportunities
One downside to enrolling on the Google ETP is that it limits your timing opportunities. Some investors will want to take advantage of volatility in the market to cash in when stocks are valued at their highest. If you’re enrolled in the ETP, you might not have this same level of control to sell when it suits you.
Restricts Flexibility
An ETP restricts your ability to manage your vested GSUs. Some people want the opportunity to change their plan as they go, which isn’t something you can do after opting into the Google ETP. By keeping your GSUs out of the ETP, you maintain flexibility in your investment decisions.
May Not Align with Speculative Financial Strategies
While Google ETP reduces decision fatigue and automates the process of selling vested shares, some individuals enjoy that part of managing their investments and look forward to the potential for massive returns. If you’re motivated by speculative strategies, the Google ETP might not be for you.
Strategize Your Next Move with Consilio
Not sure if the Google ETP is the best move for your future? If you need financial guidance to help decide how to make the most of your GSUs, the CERTIFIED FINANCIAL PLANNERs™ at Consilio can help. We specialize in serving tech professionals with unique compensation structures that include stock options, cash bonuses, RSUs, and so on. Our expert team can provide the education, advice, and support you need to make strategic moves for your lifestyle and financial portfolio.
You’ve worked too hard to let money steal your financial freedom – it’s time to make that money work hard for you instead. Reach out to us today to see how we can help you make key decisions about your Google ETP opt-in.
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