hard to let go of IBM

[linuxuser]

Back before I found the Boglehead way, I bought individual stocks.

One of such stocks is IBM. I bought 15 shares about 20 years ago at $85/share.
I now have 60 shares after splits. It is trading at over $200.

I don't need the cash right now, but it seems now would be a good time to sell it, but emotionally it is "sad" to sell it.

Also, how do I calculate how it did against the S&P ?

[Rainier]

Pretty sure it beat the s&p.

You don't have to sell it. Warren Buffett likes it.

[mpt follower]

Do not! Bogleheads strategy is not GOD!

[Imperabo]

The fact that you're emotionally attached is a big reason why you should get rid of it. That's one of the main reason I don't buy individual stocks anymore.

[Sbashore]

If you're ok with excluding that amount from your portfolio and regarding it as "play money" then go ahead and keep it. If it's significant enough to you to include it in your A/A then apply your IPS to it. Which if your IPS is Bogleheadish, probably means sell it.

[Default User BR]

You could also sell part and keep some for old time's sake.


Brian

[bottlecap]

What good is picking a ten-bagger if you don't sell it?

You could hang the certificates on your wall and tell everyone the story until IBM tanks, then you can take it off your wall.

JT

[BarbK]

IBM was also the first stock I ever bought - mid 80s. I have it in paper form and they send the distro check every 3 months.

I have never converted it to a broker, because I would be so tempted to sell it. My original 20 shares are 80 shares.

[kenschmidt]

Your cost basis has to be unbelievably low. You are going to take a big step back if you sell because you will pay taxes on almost all of the sale amount. Whatever you replace it with will need to significantly outperform for some period of time to make up for the tax hit.

If it is a small enough part of your portfolio that the single stock risk is low, I would probably keep it. If it is half of your stock portfolio, you have to consider the risk that it takes a big hit and should probably diversify out of it. If you have taxable losses in other investments, you could use those to offset gains and slowly reduce your position in IBM.

[Toons]

Back before I found the Boglehead way, I bought individual stocks.

One of such stocks is IBM. I bought 15 shares about 20 years ago at $85/share.
I now have 60 shares after splits. It is trading at over $200.

I don't need the cash right now, but it seems now would be a good time to sell it, but emotionally it is "sad" to sell it.

Also, how do I calculate how it did against the S&P ?

I say hold it another 20 ,that is what I plan on doing with Coke,McDonalds and Wal-Mart

[Abe]

I bought IBM many years ago. Looking back, I realize now that it was extremely high at the time I bought it. I know a little more now than I did then. I think originally I bought 15 shares and my total investment was $5,000. I don't think I invested anymore out of pocket and now I have a little over 342 shares @ $204.95, total value is a little over $70.000. It has had it's ups and downs over the years, but I do not plan to sell it anytime soon.

[Christine_NM]

Keep it (she said) if you don't mind that it will someday go down 40-50% again from some unknown high point. It's not costing you anything. Bogleheadedness is about low cost investing. Otherwise do mostly index funds.

[jsl11]

The best thing you can probably do with it is to give it away. If you use it for your charitable donations, you avoid all the CG taxes, and you get to use the full value of the donations as itemized deductions.
Jeff

[zaboomafoozarg]

After working with many of their horribly bloated, expensive, problematic products, I would never be able to be IBM individual stock in good conscience

[nisiprius]

Also, how do I calculate how it did against the S&P ?

If you go to Morningstar and plot a mutual fund growth chart first, you can then "compare to" an ETF or individual stock and it will plot a growth chart for the stock... dividends reinvested. If we make VFINX the mutual fund, we can go back to 1976 (and we can get the actual S&P as one of the benchmarks, although I remove it to avoid clutter as it just overlays VFINX anyway). You can set the endpoints that apply to you.

Here are the results: $10,000 in Vanguard 500 Index, versus $10,000 in IBM with a dividend reinvestment plan (DRIP). Interesting, isn't it? No, I don't mean that ironically. It shows you the actual nature of individual stock risk. The thing I notice is that you can have periods of "consistent" outperformance (1993-2000) or underperformance (1984-1993) that can last almost a decade. And also notice the plateau from 1983-1992; it would have been awfully easy to hang in their, year after year, saying "well, it's not making me any money and it's not keeping up with the S&P, but I'm not seeing any huge losses, either, I feel pretty safe."



Or, we can make MITTX the mutual fund, and go back as far as Morningstar has data for IBM, which seems to be about 1963 Let's throw in GE, too. Got it? None of 'em beat the S&P 500 index, not the actively managed MFS Massachusetts Investors' Trust, not IBM, not GE.



They also let you plot the Dow Jones Industrial Average total return... and neither MITTX, nor IBM, nor GE beat the Dow, either.

[Beagler]

Perhaps you could donate some portion of it to a worthy charity.

[Valuethinker]

Back before I found the Boglehead way, I bought individual stocks.

One of such stocks is IBM. I bought 15 shares about 20 years ago at $85/share.
I now have 60 shares after splits. It is trading at over $200.

I don't need the cash right now, but it seems now would be a good time to sell it, but emotionally it is "sad" to sell it.

Also, how do I calculate how it did against the S&P ?

Except for the problem of tax as you get closer to retirement, you want to be more diversified. There's nothing in IBM's business model that says it is going to be a 10 bagger-- what is past is history. Sunk cost. What IBM is a proxy for business spending on Information Technology.

IBM nearly went off the cliff in 1992 and Gil Amelio ((?) turned it round. But there's no further turnaround to be done.

The main issue is minimizing tax on sale.

[Rainier]

Yes, expecting another 10x out of IBM is unrealistic.

If you were planning on making cash donations then donating the stock is a no brainer, otherwise just pay the tax when you sell. Many people here would rather give away $100 to save $15 in taxes.

[freebeer]

Your cost basis has to be unbelievably low. You are going to take a big step back if you sell because you will pay taxes on almost all of the sale amount. Whatever you replace it with will need to significantly outperform for some period of time to make up for the tax hit.

If it is a small enough part of your portfolio that the single stock risk is low, I would probably keep it. If it is half of your stock portfolio, you have to consider the risk that it takes a big hit and should probably diversify out of it. If you have taxable losses in other investments, you could use those to offset gains and slowly reduce your position in IBM.

If $12K is half of this at least 40-year-old's portfolio (I'm assuming he didn't buy IBM in 4th grade...) then OP's got a much more serious problem. Unless OP clarifies otherwise, I think we can assume it's a small % of net worth. In that case charitable donation is an interesting idea as mentioned by other poster, or as you say offseting with other taxable losses.

[Saving$]

The best thing you can probably do with it is to give it away. If you use it for your charitable donations, you avoid all the CG taxes, and you get to use the full value of the donations as itemized deductions.
Jeff

+1

Stop donating money to the main organization(s) you support. If you give weekly or monthly at your place of worship, stop. If you give to your alma mater or to a social service nonprofit, stop.

Once a year, give a lump sum amount to those charities set up to receive in kind gifts of securities. You can deduct the entire amount of it's present value, never pay cap gains taxes on it (so theoretically you can give the charity more). This also makes it easier to part with the stock if you are emotionally attached.

If you give enough $50-$100 donations, look into setting up a charitable trust with Fidelity. I think it will cost you $100 year. If you have a family member with the same issue, whom you trust, you can share the trust and the cost .

[Harold]

IBM nearly went off the cliff in 1992 and Gil Amelio ((?) turned it round.

You were close -- but the correct spelling is L-o-u G-e-r-s-t-n-e-r

[linuxuser]

Your cost basis has to be unbelievably low. You are going to take a big step back if you sell because you will pay taxes on almost all of the sale amount. Whatever you replace it with will need to significantly outperform for some period of time to make up for the tax hit.

If it is a small enough part of your portfolio that the single stock risk is low, I would probably keep it. If it is half of your stock portfolio, you have to consider the risk that it takes a big hit and should probably diversify out of it. If you have taxable losses in other investments, you could use those to offset gains and slowly reduce your position in IBM.

If $12K is half of this at least 40-year-old's portfolio (I'm assuming he didn't buy IBM in 4th grade...) then OP's got a much more serious problem. Unless OP clarifies otherwise, I think we can assume it's a small % of net worth. In that case charitable donation is an interesting idea as mentioned by other poster, or as you say offseting with other taxable losses.

No, IBM is not half of my portfolio. Thank goodness. I still have over $5K in carryover losses from previous years, so this may be a good time to sell.

Nisiprius' graphs seals the deal. I will go and learn how to do what he did!!!

[linuxuser]

The best thing you can probably do with it is to give it away. If you use it for your charitable donations, you avoid all the CG taxes, and you get to use the full value of the donations as itemized deductions.
Jeff

+1

Stop donating money to the main organization(s) you support. If you give weekly or monthly at your place of worship, stop. If you give to your alma mater or to a social service nonprofit, stop.

Once a year, give a lump sum amount to those charities set up to receive in kind gifts of securities. You can deduct the entire amount of it's present value, never pay cap gains taxes on it (so theoretically you can give the charity more). This also makes it easier to part with the stock if you are emotionally attached.

If you give enough $50-$100 donations, look into setting up a charitable trust with Fidelity. I think it will cost you $100 year. If you have a family member with the same issue, whom you trust, you can share the trust and the cost .

Can you explain more about this?

I never thought I was "rich" enough to set up a charitable trust, but this year I wrote several checks of $50+ to various charitable organizations.

[statsguy]

Every time I see a version of this quote, I recall my parents...

Keep it (she said) if you don't mind that it will someday go down 40-50% again from some unknown high point. It's not costing you anything. Bogleheadedness is about low cost investing. Otherwise do mostly index funds.

In October 1987 (when stocks dropped 22% on what is now called Black Monday) I recall my Dad coming home and saying something to the effect he would have to work into his 70's to retire now (he was 51 at the time). Anyway after several morbid discussions of our finances around the dinner table, he called his broker to find out where he stood. His broker was very apologetic saying that his account had fallen almost 30%.... but once my Dad heard the balance he was very happy. He had not checked his balance in a few years and the amount was more than twice what he thought he had. As I recall 1987 ended with a positive gain and he retired as planned.

Stats

[jsl11]

No, IBM is not half of my portfolio. Thank goodness. I still have over $5K in carryover losses from previous years, so this may be a good time to sell.

It is better to use the carryover losses to offset ordinary income rather than offset capital gains. You can do this up to $3000 per year. Since ordinary income is taxed at a higher rate than CG, the offset is worth more.
Jeff

[nisiprius]

Nisiprius' graphs seals the deal. I will go and learn how to do what he did!!!

How to use Morningstar growth charts, Bogleheads' Wiki. But please do remember, the charts just show the past, and for all you or I know, IBM might be poised for another growth spurt. It's all in the starting points, start the chart at 1994 and IBM will look awfully good.

[madpunster]

One possibility is to sell enough current shares to take your original investment off the table, probably six or seven shares. Then you can just let your profit ride knowing you can't lose no matter what the winds of fate do to IBM.

[momar]

Just sell it and pay the damn tax. You knew you would have to pay tax on the gains when you bought it.

Sheesh. Some people here are so afraid of taxes they don't want to make money.

It's like the people who leave money in a MM in an after tax 401k so that they don't have to pay tax on any growth when the roll it into a Roth.

[umfundi]

One possibility is to sell enough current shares to take your original investment off the table, probably six or seven shares. Then you can just let your profit ride knowing you can't lose no matter what the winds of fate do to IBM.

Mental accounting always works.

I think the telling thing is that the upside of the index is provided by only a few stocks. The median stock will underperform the index. Keep IBM, it will make for good party conversation.

By the way, back in the 1980s I bought the original Silicon Graphics (SGI) for $7 a share. It went to $75, and I sold afterwards at $14. Doubled my money! That cured me of individual stocks forever.

Except, I needed a booster inoculation. I bought 200 shares of the new GM at the IPO. Long since sold for a 30% loss.

Keith

[Saving$]

Can you explain more about this?

I never thought I was "rich" enough to set up a charitable trust, but this year I wrote several checks of $50+ to various charitable organizations.

http://www.bogleheads.org/wiki/Donor-Advised_Funds

http://www.fidelitycharitable.org/givin ... orks.shtml
Click through all the tabs across the top of the page to understand how this works.

[Rainier]

Just sell it and pay the damn tax. You knew you would have to pay tax on the gains when you bought it.

Sheesh. Some people here are so afraid of taxes they don't want to make money.

It's like the people who leave money in a MM in an after tax 401k so that they don't have to pay tax on any growth when the roll it into a Roth.

Yep, lots of those people here. Would rather make $0 then pay tax on a dollar.

[linuxuser]

Nisiprius' graphs seals the deal. I will go and learn how to do what he did!!!

How to use Morningstar growth charts, Bogleheads' Wiki. But please do remember, the charts just show the past, and for all you or I know, IBM might be poised for another growth spurt. It's all in the starting points, start the chart at 1994 and IBM will look awfully good.

I started it at 01/25/1993 and compared it against the S&P 500 SPX.
IBM does look good (unless I did it wrong). SPX gains about 250% and IBM is 1492%.

[livesoft]

Your cost basis has to be unbelievably low.

He explicitly stated that his cost basis was 15 * $85 = $1275. That doesn't seem unbelievably low to me.

I'd donate some to charity and give some shares to my kids and tell them to SELL IT. My kids won't pay taxes on the gains.

[kenschmidt]

Your cost basis has to be unbelievably low. You are going to take a big step back if you sell because you will pay taxes on almost all of the sale amount. Whatever you replace it with will need to significantly outperform for some period of time to make up for the tax hit.

If it is a small enough part of your portfolio that the single stock risk is low, I would probably keep it. If it is half of your stock portfolio, you have to consider the risk that it takes a big hit and should probably diversify out of it. If you have taxable losses in other investments, you could use those to offset gains and slowly reduce your position in IBM.

If $12K is half of this at least 40-year-old's portfolio (I'm assuming he didn't buy IBM in 4th grade...) then OP's got a much more serious problem. Unless OP clarifies otherwise, I think we can assume it's a small % of net worth. In that case charitable donation is an interesting idea as mentioned by other poster, or as you say offseting with other taxable losses.

No, IBM is not half of my portfolio. Thank goodness. I still have over $5K in carryover losses from previous years, so this may be a good time to sell.

Nisiprius' graphs seals the deal. I will go and learn how to do what he did!!!

Yes, sorry I missed that part. I was recently talking toa friend who's company pays all profit sharing in company stock with limited ability to sell. That was on my mind as I wrote my post and I missed the $12k part. Apologies.

Sounds like you have a good strategy to transition out without paying too much to Uncle Sam.

Best regards,
Ken

[kenschmidt]

Your cost basis has to be unbelievably low.

He explicitly stated that his cost basis was 15 * $85 = $1275. That doesn't seem unbelievably low to me.

I'd donate some to charity and give some shares to my kids and tell them to SELL IT. My kids won't pay taxes on the gains.

I wasn't sure about any reinvested dividends but I'd say a cost basis of $1275 on $12000 is pretty low. Most of the proceeds are taxable.

Unbelievably low? I will grant you that was probably overstated in my enthusiasm to post...

[papito23]

Just sell it and pay the damn tax. You knew you would have to pay tax on the gains when you bought it.

Sheesh. Some people here are so afraid of taxes they don't want to make money.

It's like the people who leave money in a MM in an after tax 401k so that they don't have to pay tax on any growth when the roll it into a Roth.

As this TIME article reminded me, paying income tax is a sure sign that you have an income. Made me less enthusiastic about my wonderful Earned Income Tax Credit. You did well - take the profit while it is still there, and you'll be forced to help fund all of the things that keep the system rolling.

[EyeYield]

I started it at 01/25/1993 and compared it against the S&P 500 SPX.
IBM does look good (unless I did it wrong). SPX gains about 250% and IBM is 1492%.

That sounds about right.

But please do remember, the charts just show the past, and for all you or I know, IBM might be poised for another growth spurt. It's all in the starting points, start the chart at 1994 and IBM will look awfully good.

And so does that.

I'm not qualified to give advice, but if it's 1-5% of your portfolio, probably not a big deal.

[brainstem]

From time to time, I have made "larger" charitable donations

The best move for a lump sum event is to donate an appreciated stock

You avoid the capital gains and get the full value of the donation.

Your after tax donation gets close to 50%, depending on the amount of appreciation.

For example, I recently donated 100 shares of GLD when it was at 157 with a cost basis of 45.

The math is compelling.

[umfundi]

Your cost basis has to be unbelievably low.

He explicitly stated that his cost basis was 15 * $85 = $1275. That doesn't seem unbelievably low to me.

I'd donate some to charity and give some shares to my kids and tell them to SELL IT. My kids won't pay taxes on the gains.

Yes, they will.

If you give it to your kids while you are alive, they inherit your basis.

If you die and your estate pays the taxes (if any), then the basis is stepped up to the day they receive it.

Keith

[Dandy]

IBM is great. You love it but stocks don't love you back. You have a small investment in a very good company. It has risen a lot over the last few years (since I sold it!!). I was tempted to keep it but then decided to stop playing with individual stocks and go index funds. If you don't take your IBM profits now - then when? Now seem to be a good time to get out.

[pennstater2005]

Do not! Bogleheads strategy is not GOD!

Maybe not. But it's better than the alternatives.

[nisiprius]

And, by the way... cue The Brothers Four, The Thinking Man, John Henry

[livesoft]

Your cost basis has to be unbelievably low.

He explicitly stated that his cost basis was 15 * $85 = $1275. That doesn't seem unbelievably low to me.

I'd donate some to charity and give some shares to my kids and tell them to SELL IT. My kids won't pay taxes on the gains.

Yes, they will.

If you give it to your kids while you are alive, they inherit your basis.

With their current income and current tax bracket, they do not pay any taxes on the shares I give them that they sell right away.

[linuxuser]

IBM is great. You love it but stocks don't love you back. You have a small investment in a very good company. It has risen a lot over the last few years (since I sold it!!). I was tempted to keep it but then decided to stop playing with individual stocks and go index funds. If you don't take your IBM profits now - then when? Now seem to be a good time to get out.

I agree. Now it a good time to get out. I am putting a sell order today.

[Sunny Sarkar]

I don't need the cash right now, but it seems now would be a good time to sell it, but emotionally it is "sad" to sell it.

If the money is for the long term, I'd sell it - for the simple reason that all companies eventually cease to exist (just see the Dow company list from 30 years ago. GE is an exception, but that's the only one). Long term buy & hold can't be implemented with individual stocks due to this simple problem.

[livesoft]

I agree. Now it a good time to get out. I am putting a sell order today.

Very interesting. I suppose you will submit a limit order but at a higher price than recent days. Can I guess $210 or even higher?

[linuxuser]

I agree. Now it a good time to get out. I am putting a sell order today.

Very interesting. I suppose you will submit a limit order but at a higher price than recent days. Can I guess $210 or even higher?

Yes, a limit order at the nice round number of $210.