Elon Musk Gave His Employees This Unorthodox Wealth-Building Advice — Do Experts Agree?
Written by
Jennifer Taylor
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Levi Leidy
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The world’s richest man has given controversial financial advice. More than once, Elon Musk has told SpaceX and Tesla employees to invest in their employer during liquidity events.
To his credit, Musk didn’t advise them to invest all their money, but he did encourage them to keep any shares they purchased for the long term. This financial advice is unconventional, but considering his net worth, you might be wondering if he’s onto something.
GOBankingRates spoke with three financial advisors to get their take on this situation. Keep reading to find out if they agree or disagree with Musk.
Filip Telibasa: Maybe, but Don’t Invest More Than 10% of Your Portfolio
Depending on the situation, Filip Telibasa, CFP, owner and planner at Benzina Wealth, might be on board with workers investing in their employer.
“For example, [if] he is advocating for some sort of investment to the company stock after employees max out other vehicles like 401(k)s and backdoor Roth IRAs,” he said. “This makes more sense, as it allows the ability to diversify and capture the tax benefits of these other savings vehicles.”
Even in this case, he said it’s important to be cautious with how much you invest in one company — any company.
“I like to use 10% as a benchmark,” he said. “In other words, do not hold more than 10% of your investment assets in any one security.”
Michael Becker: Yes, but Diversification Is Important
“Investing in the company you work for can absolutely be a powerful wealth-building strategy,” said Michael Becker, CFA, CFP, partner at Toberman Becker Wealth. “Companies often provide employees with discounted stock purchase plans or stock options, allowing them to buy shares at an advantageous price.”
He also noted that companies with significant employee ownership may perform stronger, as workers are more invested in its success.
“However, I’d caution against putting too many financial eggs in one basket,” he said.
Diversification is important, he said, because a downturn or business-specific challenge could heavily impact both your livelihood and retirement portfolio.
“Participate in company plans up to the point where the benefits — like discounts or matching — are maximized, but periodically rebalance into a more diversified portfolio,” he said. “This approach captures the opportunity, while managing risk in a practical way.”
Paulo Lopes: Only If You’re OK With Risk
“One word: Enron,” said Paulo Lopes, J.D., founder and financial planner at Woodmont Financial Partners. “This was a company where executives were literally on stage encouraging employees to buy more Enron stock in their 401(k), while those same executives were dumping their shares.”
He also cited similar situations at other companies, including WorldCom and Lehman Brothers.
“Yes, employees at Dell became ‘Dellionaires’ in the late ’90s, and folks at Nvidia, Tesla and AMD have seen their stock soar over the last 10 to 15 years,” he said. “But what about Intel? It is on life support and might not turn around.”
He noted that Enron was legitimate fraud, but said it can be hard to know when having a concentrated position in a company is wise or reckless. To manage risk, he advised keeping the investment in your employer to 5% or less of your portfolio.
“If you are okay with risk, can stomach the swings and have enough assets elsewhere, then 10% might be fine,” he said.
Ultimately, Lopes advised that there’s no need to bet everything on the company that already controls when you work and how much you’re paid.
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