What Silicon Valley employees are doing with their red-hot stock grants

Tech employees have some extra cash to play around with. Source: Pixabay
Tech employees have some extra cash to play around with. Source: Pixabay

In case you needed further evidence Silicon Valley is on a roll — aside from escalating tech worker salaries and stratospheric real estate and rental prices — look no further than the S&P 500 Information Technology Index.

The index of over 60 of the largest US tech companies, which includes Nvidia (NVDA), Yahoo Finance’s Company of the Year and AMD (AMD), closed on July 19 at an all-time high of 992.3 — the highest it’s been since the dot-com crash of 2000. That shouldn’t come as a surprise, given the individual performance of tech stocks such as Facebook (FB), which has skyrocketed roughly six-fold over the last five years.

But for some employees at such high-flying tech businesses with vested shares on their hands, it’s now a tempting opportunity to sell and cash out. Yahoo Finance spoke to tech workers to learn what they plan on doing with stock. Several employees professed to selling their shares and using at least some of that cash to the snap up real estate, while another employee plans on holding onto their Amazon stock indefinitely.

“Every time my company stock comes, I sell them all”

One Facebook software engineer, who spoke to Yahoo Finance on condition of anonymity, cashed some of his vested stock in 2015 to purchase a Manhattan apartment. Last year, he cashed more than half of his shares to diversify his investment portfolio to purchase other stocks such as Urban Outfitters (URBN) — a move he now regrets and calls “silly.” While Facebook stock jumped about 35% over the last 12 months, shares of Urban Outfitters plunged by an alarming 40%, due in part to lagging sales at its brick-and-mortar stores.

“I regretted it a lot,” the Facebook employee acknowledged.

A LinkedIn employee, who also declined to be named, also makes a habit of cashing out stock and using that cash to diversify his investment portfolio.

“Every time my company stock comes, I’ll sell them all,” said the LinkedIn employee, who buys shares in companies that are big on cloud computing like Amazon (AMZN), Google (GOOG, GOOGl), and Alibaba (BABA).

The employee, who uses his residual income and cash from his vested stock to invest, realizes investing in other tech giants doesn’t necessarily bring greater returns than his colleagues who just leave the stocks in their accounts. But he still prefers this method as a way to mitigate risk.

It’s a great idea for tech workers to diversity their investments, according to Aaron Rubin, a San Jose, Calif.-based senior wealth manager for Werba Rubin Papier Wealth Management. He manages the money of many tech employees who work for Apple (AAPL), Amazon, Oracle (ORCL) and many other tech institutions.