Brant Cavagnaro, CFA, CFP®, ECA and Joe Orff, CFA, CFP®

Deciding when to sell equity compensation is a major financial decision, often driven by a mix of personal and strategic factors. Some employees and executives sell to diversify their portfolios and reduce the risks of being too heavily invested in a single company, while others seek to use equity sales to fund major life goals, such as buying a home or securing financial independence.

The valuation and exercise of stock options with privately held companies introduces unique complexities for investors. In this Insight, I will review some key considerations with a focus on the main differences between common types of equity compensation and their implications for taxes.