The risks include the loss of the original investment and the absence of returns (non-payment of potential dividends).
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Concentration Risk: Investing in company stock can lead to an overconcentration of your investments in a single asset. If the company's performance falters, it can result in significant financial losses.
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Dependency on Company Performance: The value of your investment is highly dependent on the company's performance. Poor company performance can negatively impact the value of your investment.
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Liquidity Risk: Selling company stock certificates may be challenging, particularly if there are restrictions on trading these shares. This can lead to a lack of liquidity and difficulties in selling your investment when needed.
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Job Loss Risk: If your investment is closely tied to your job, and the company performs poorly, you not only face financial risk but also the risk of losing your job, resulting in double losses.
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Tax Implications: Investing in employee stock certificates can have tax complications. You may be required to pay taxes on any gains, and there may be regulations related to employee stock ownership that you need to consider.
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Limited Diversification: By investing in your company's stock, you may lack the diversification needed for risk management. Diversification is a fundamental principle of risk management, and the absence of it can expose you to unnecessary risks.