Many employers give their employees the option of investing in the company’s own stock. Organizations usually do this as a way to encourage loyalty and increase the chances of their employees staying with them. While investing in your company’s stock may seem like a good idea, it is important to remember that this is not without risks. Here’s what you need to know about investing in company stock:

• Don’t assume your company is financially stable: It’s best to not make any assumptions about your company’s financial health just because they offer you stocks either for free or at a discounted rate. 
• Company stock is offered as an incentive: As mentioned earlier, companies offer their stocks to employees as an incentive. If the company’s stock does well, you can benefit from it financially. On the other hand, if the company doesn’t do well, you could be in a losing position. 
• It increases your financial dependence on the company: Keep in mind that you are already quite dependent, in a financial sense, on your company. Your company’s financial well-being is what provides for your salary, retirement plan, and health insurance benefits. If you voluntarily purchase the company’s stock, you will be even more financially dependent on the firm. While this works out just fine if your company is doing well, you could incur a significant loss if it starts to struggle financially.
• Make alternate investments: Even if you have already invested in the company’s stock, ensure that you diversify your portfolio. It is important to make investments across various asset classes and industries. Make sure to have some emergency savings as well. You should view your company’s shares as just one of the many components in your investment portfolio. 
• Understand tax implications: You should be aware of the tax implications of owning your company stock before you buy into it. If your company does well and you earn dividends, you will need to pay taxes on this amount. Also, if you decide to sell the shares you currently hold, you will need to pay capital gains. Remember that if you own a substantial amount of your company’s stock, you will need to also pay the resulting taxes. 

Companies can distribute stocks in a number of ways. You’ll find that some companies make it a part of the employee’s compensation plan, while sometimes, stocks are offered at discounted rates to employees. So, for instance, if the stock is offered at a price of $75 apiece in the open market, you may be offered the same stock at $60. Other times, the company will offer its stocks to employees as part of their 401(k) plan. 

Having a share of your company’s stocks can work out very well for you if the company performs well. If you are considering investing your own money in the company, ensure that you do the required research into the company’s financial health before making your decision.