Looking to sell some stocks.

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Looking to sell some stocks.

Postby stl » Fri Mar 22, 2013 9:47 pm

Hi all...
I have been lurking on here for quite awhile, but this is going to be my first real post.

But first, I wish to thank everybody for all the great information and opinions found on this board. I feel I have learned so much since finding bogleheads several months ago.

Anyway, I have already started down the path of consolidating our IRAs at Vanguard, moving our Emergency Fund into a High(er) Yield Online Money Market, etc.

Before finding bogleheads, I thought I wanted to own stocks- in addition to the Mutual Funds I already invested. Long story short... I opened an account at Scottrade and funded it with some extra 'play money' I had and purchased 3 different stocks.
I have since decided (from this board) that this is way to risky it was not such a great idea. All of these purchases were more than 365 days ago, so we are past the short term gains.
All 3 are dividend paying Large Cap stocks. 2 of them are up 18% each and 1 is down 9% unrealized since I bought them.

My question is what is the best exit strategy? Im thinking taxes are my biggest concern, but not totally sure I am not missing something else.
Do I wait for the next round of dividend pays?

Thank You so much for your time, and I look forward to your answers.
This will get me a big step closer to the Boglehead Way.

stl
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Re: Looking to sell some stocks.

Postby harikaried » Fri Mar 22, 2013 9:50 pm

What federal income tax bracket are you in? If 10% or 15%, you pay 0% for long-term capital gains.
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Re: Looking to sell some stocks.

Postby stl » Fri Mar 22, 2013 10:04 pm

harikaried wrote:What federal income tax bracket are you in? If 10% or 15%, you pay 0% for long-term capital gains.


We are in 15%.
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Re: Looking to sell some stocks.

Postby abuss368 » Fri Mar 22, 2013 10:30 pm

You are holding a few individual stocks in excess of one year so you will be taxed at the lower long term capital gains rate.

But that is besides the point. Forget the taxes. If you are up at night as Warren Buffett so often notes, sell the stocks. Is it worth it to hold on longer due to taxes (not to mention the gains could increase more) at the risk of one or all of the holdings tanks and possibly never comes back?

I would consider selling the stocks, developing an asset allocation plan, allocating the proceeds to the mutual funds, and staying the course.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + REITs
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Re: Looking to sell some stocks.

Postby Karamatsu » Sat Mar 23, 2013 3:06 pm

My question is what is the best exit strategy? Im thinking taxes are my biggest concern, but not totally sure I am not missing something else.


No, that's about it. There's nothing much else to be concerned about. Except that you should probably use a limit order when you sell.

Do I wait for the next round of dividend pays?


In theory if a stock is priced at $50/share just before it goes ex-dividend, then declares a $5 dividend, then its price should fall to $45/share immediately afterwards, so the dollar amount you receive is the same either way. It's just a question of whether you get it as 45/5 capital gains and dividends, or 50 as capital gains. If you're in the 15% tax bracket then you pay no tax on long-term capital gains and might as well take the whole thing as capital gain now. Dividends would be taxed either at 0% (if qualified) or 15% (if ordinary), so in the worst case waiting for the dividend will cost you money, and in the worst worst case the share price could decline, too. No way to know!

The other big advantage of taking it all as a capital gain is that you can do it now. Then enjoy the sweet satisfaction of selling at a gain, move the money to your mutual fund portfolio, and rest a little bit easier. At least that's what I'd do.
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Re: Looking to sell some stocks.

Postby hollowcave2 » Sat Mar 23, 2013 9:09 pm

I'd be grateful for the gains. If you've already made the decision to sell, I'd just sell. Then get the cash to work on your new plan.

If you have losses in other funds, you can also harvest some of those to offset the gains. If you do that, I'd place the money in a different fund that may be a better choice.
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Re: Looking to sell some stocks.

Postby letsgobobby » Sun Mar 24, 2013 10:21 am

Donate your winners to charity in lieu of cash. That keeps you from paying any taxes at all on the gains. Sell the loser to tax loss harvest.
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