What if I held all of my RSUs? A case study
Hi!
One of my first posts was why I sell my RSUs as soon as they vest. I wrote about my reasons - avoiding concentration risk, sticking to my asset allocation and diversifying from employer performance. But does it impact my portfolio return?
Running the numbers
has built a great RSU Dashboard and Equity compensation tracker to track the past and upcoming equity portion of one’s compensation. I highly recommend you check it out!The tracker has a “RSU Hold vs Diversify” tab to visualize how much you’d have if you held all your RSUs on vest versus diversify immediately. He uses VTSAX (a popular index fund in the US), but since it’s a Google Sheet I can plug in a desi index fund to compare - UTI Nifty 50 Index fund (use UTI_NIFT_50_FGX2CX)
Here’s how it looks:
The current percentage difference is -49.69%.
What’s more surprising to me is that diversifying has always been the better strategy compared to holding my employer stock. And now that tech stocks are at their lowest in a while, this difference is more pronounced.
But it would be unfair to compare a stock trading in the US to an index in India. So let’s see how it compares to VTSAX:
The percentage difference is -36.25%.
Here as well diversification always beats out the hold strategy.
Wrapping up
Of course this is not an exhaustive study. Mine is just one data point which began during COVID when index valuations were low but tech stock valuations were sky high. Was this a fluke? I’ll maybe write an update after more RSUs vest and I sell over the next few months and years.
But anyway the purpose of diversification was never to improve returns. It was to reduce risk and volatility in my retirement portfolio. It helps with predictability and peace of mind during retirement. I wouldn’t trade that for some upside potential but higher volatility.
How does your chart look like? Let me know in the comments below.
Until next time!