Reader Dave asks:

Why would you stop contributing to ESPP and not sell shares and lock in gains?

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Some background, my ESPP balance is equivalent to about 10-12% of my
total investment portfolio, so it’s at the maximum allocation it should
be.

Dave makes the assumption that I have gains. His experience with
ESPP’s is very different from my current company’s plan. I buy stock
for a discount far less than his stated 10-15%. With market
fluctuations, I really cannot say from day to day if I’m going to make
money selling the stock. Depending on the whims of the market, I could
actually lose money on an open-market sale right now and probably for
the near future.

I would love to lock in some gains, but selling everything in the
ESPP also means that I essentially get kicked out of the plan for a
certain period of time. I’d rather just hold on and collect the
dividends for now. Maybe if the stock rises another 5-10% I can think
about selling for a gain, but the stock’s down some 40% since I first
start participating last year, and an 8% discount price isn’t going to
cover for that kind of loss in the near term.

I’d love to lock in some gains because that would mean I had some and I wouldn’t get penalized for selling off.

EDIT: I double checked my plan this week and I could sell off
some of the shares for a gain (Since the market had quite a lift on
Monday), and I would not be penalized for selling off shares from a
prior period. (Shares are bought in cycles. I would be barred for
selling shares acquired in the current buying cycle, so my statement up
above is still true.)

I was thinking of using this money to pay for renovations as I
convert to a rental. However, all things being equal, I could also hold
the stock and do nothing because I would be selling during a period of
short-term capital gains. (The gain to be had is about 10%, less taxes).