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Lesson 15. More Strategies and Tips > Psychological Factors - Pg. 73

More Strategies and Tips 73 Psychological Factors Many people think employee stock options are the pot of gold at the end of the rainbow, and for more than a few that has been true. However, cashing in on this potential windfall is not always as easy as it seems. Previous lessons have dealt with the complications this decision entails. The simple rule that holding options as long as possible to produce the highest return is not always the best strategy. In addition, other considerations such as a need to diversify may take on more significance than potential future benefits. Obviously, if cashing in your options means you don't lose your house, then any future benefit is meaningless. The point is you should make decisions about your options based on some logical reasons. There is, however, a whole body of research that suggests we don't always make investment decisions based on what makes the most sense in our current financial situation. It is common for option holders to spend an inordinate amount of time watching the price of the underlying stock, calculating their gains or losses on a daily basis. Tip Be honest with yourself about your ability and willingness to keep on top of your investments. If you have neither the time nor the interest in following your investments, hire an investment adviser. You should certainly keep an eye on your investments, but don't let it become an obsession. If you work for a company whose stock bounces up and down on a daily basis, you may become a nervous wreck watching your fortune rise and fall. Spend some time studying the underlying stock and what analysts are saying about the company.