February 2, 2016
How could I afford Berkshire Hathaway stock?!
The cash merger is now done! PCC is officially a Berkshire Hathaway subsidiary and $235 per share was the price paid for the company. That cash is now sitting in your account (Fidelity if you’re part of the employee stock option purchase plan ESPP) and ready for direction. A question I just got this morning was… “How could I afford to purchase Berkshire stock that’s trading at approx. $194,000 per share?!”
Other than purchasing a fraction of one share (or a whole share if you’re fortunate) there’s an easier way to purchase a smaller amount of Buffet’s company. The way to do this is by buying class B-shares (Ticker: BRK-B). These are currently trading at approximately $128 per share. The owner of these shares will still own a portion of Berkshire Hathaway and Precision Castparts, but the downside is you might not be asked your opinion at the next board meeting. Pretty inconsequential to most of us.
Whether or not you’d like to reinvest in BRK-B, here is the process to get access to your account based on a call I made to Fidelity (ESPP provider) on Monday.
What does Fidelity require to access your account?
- Call Fidelity at (800) 544 9354
- Have your account number from your statement ready
- Have Social Security number available.
What can I do with the proceeds?
1. Reinvest at Fidelity
Fidelity reported trades can be made in the ESPP accounts. The cost is $7.95 for trades done online, $32.95 for trades done on the phone, and no trading fees for mutual funds, but other fees apply to mutual funds that we can provide further explanation on.
Just for some friendly competition, trading fees at Retirement Income Advisors are $8 for stocks, whether they’re over the phone or online.
2. Reinvest somewhere else (like JoinRIA.com!!!)
To reinvest somewhere other than Fidelity, a transfer will need to be made.
Retirement Income Advisors uses TD Ameritrade as our custodian. A simple application can be sent and signed electronically to set up the account and transfer the assets into your new account to be managed by us. Click here if you’re interested.
Regardless of where you invest, please confirm your advisor can articulate clearly the: allocation, advice, and price. These are some of the most important areas to consider and we’d be happy to go over our strategy with you at any time.
3. Withdraw cash to spend
According to standard brokerage account rules, when a stock is sold the cash proceeds are not available for withdrawal for three business days. That pushes the date to Thursday of this week before Fidelity (or other custodians) will issue a check or send you money electronically.
4. Put money aside for taxes
Because of the incredible gain on this stock, there will most likely be taxes to pay. Typically the custodian company (Fidelity for ESPP) sends a report called a 1099 with tax related information. This report will have the original cost-basis paid and the resulting gain that should be reported for tax purposes. Because the merger closed in 2016 this report will most likely be sent out late Jan or Feb of next year and used to figure your 2016 taxes.