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From "Individual" Investments to Funds and ETFs

Posted: Tue Jul 24, 2012 6:58 am
by DualIncomeNoDebt
General question concerning those of you who used to have specific or individualized investments, such as particular stocks, individual bonds, perhaps you were overweight company equity in your 401k, etc. After doing the research, you exited individual investments and made the switch to low-cost index funds, ETFs, etc.

Question is, did you dump all individual investments en masse and then jump into your chosen funds all at once and quickly? Or did you take your time, waiting many months or years before you disposed of your individual issues and were "all in" with your chosen funds and ETFs? Based on your experience, which would you recommend doing?

Final question is, did the switch allow you to ignore the noise, sleep better, or save more because you no longer worry or care about, say, a particular stock grenading your 401k, or you no longer give a damn how individual instruments or even the market performs? Post-switch, was it easier to avoid daily market gyrations, Euro implosion, etc.? Thanks.

Re: From "Individual" Investments to Funds and ETFs

Posted: Tue Jul 24, 2012 8:21 am
by JW-Retired
It's always been a gradual process. Company 401k match is in our stock and for a long while we could not shift it out until age 50 or some such. When I reach 50 I sold half and then in a few years another half, and so on. At this point I have almost no company stock. Likewise in my taxable account many years ago I had lots of individual stocks and managed funds. Gradually shifted to index funds and sold the stocks as tax considerations allowed, mostly in 2007/8. 30% of the taxable account is still in a few legacy stocks with large gains.
IRAs and large 401k are of course all indexed.
DualIncomeNoDebt wrote:Final question is, did the switch allow you to ignore the noise, sleep better, or save more because you no longer worry or care about, say, a particular stock grenading your 401k, or you no longer give a damn how individual instruments or even the market performs? Post-switch, was it easier to avoid daily market gyrations, Euro implosion, etc.?
Can't say there is much improvement. I feel a little better being indexed to a large extent because it's the wise thing to do. However, I've never responded to market noise or worried and lost sleep. Always been very que sera, sera when it comes to investments.
JW

Re: From "Individual" Investments to Funds and ETFs

Posted: Tue Jul 24, 2012 1:03 pm
by hlfo718
I dumped the individual holdings and purchased index funds all within a month. It took this long because I transferred the account over to Vanguard as well.

Before I used to be jealous of certain stocks doing so well outside my portfolio. Now I know I have pretty much covered all but the tiniest stocks so when Apple went up 50% this year, I know I also participated in that rally.

I also saved some cash from not renewing all the financial mags like Money, Smart Money, Fortune...

Re: From "Individual" Investments to Funds and ETFs

Posted: Tue Jul 24, 2012 3:09 pm
by wwross
I dumped my many individual stocks and mutual funds over a couple of months in our several retirement and brokerage accounts and created a wonderfully clean plate of money market funds. Then I spent a couple more months allocating the cash into a low cost, diversified set of ETFs. I am so happy I tore off the bandaid quickly and began investing rationally for the future. I was fairly lucky because the biggest account is my 401k and is a self directed TD Ameritrade account so that I am able to put most of my funds into low cost options.

The bonus was that I began doing this in the fall of 2008 and got most of my basic reallocation done by March, 2009. Boy, did I look good to my wife for a while!

My lesson is to sell those bad boys now and get yourself allocated the way you want to. Brokerage costs are low. Capital gains may be an issue, but you can always figure that out.

Re: From "Individual" Investments to Funds and ETFs

Posted: Tue Jul 24, 2012 3:47 pm
by DualIncomeNoDebt
These responses are helpful, thank you. I am lucky in that I have mostly larger dividend payers which have done fairly well (current flavor of the last few quarters). It's tough to sell them and get into the low-cost, broadbased fund mindset. But I don't want to be lucky, or be tracking individual businesses, or be beholden to sector whims -- I've really started to hate it, which led me to Vanguard and these forums. I want to be rational, so I'm working on it now, and have started liquidating. The cap gains are going to sting a bit (in some cases a lot), but I'm feeling better about the switch with every "sell all shares" execution I initiate.

I also have two stocks that have been absolutely crushed because of the natural gas downturn, they cut their dividend and plummeted ~45%. I'm not ready to take losses on those. I'm going to hold and see if natural gas rebounds in the next few years. This may not be the rational play, but I'm going to stick it out. Old habits die hard. Now, onto some more Admiral shares, which I am really liking with Vanguard.

Re: From "Individual" Investments to Funds and ETFs

Posted: Tue Jul 24, 2012 4:16 pm
by wwross
Sounds like a good strategy. The only thing I would say is that those Natural Gas losses might do a good job offsetting your gains. That might make it easier to pull the trigger.

Re: From "Individual" Investments to Funds and ETFs

Posted: Tue Jul 24, 2012 7:16 pm
by JW-Retired
DualIncomeNoDebt wrote:......The cap gains are going to sting a bit (in some cases a lot), but I'm feeling better about the switch with every "sell all shares" execution I initiate.
I also have two stocks that have been absolutely crushed because of the natural gas downturn, they cut their dividend and plummeted ~45%. I'm not ready to take losses on those. I'm going to hold and see if natural gas rebounds in the next few years. This may not be the rational play, but I'm going to stick it out. Old habits die hard.
Ouch! You have this backwards. You should be selling the losers to harvest the losses ASAP. It will reduce your taxes from selling the stuff with gains. If you really imagine gas will rebound then buy some other similar gas stock or fund with the proceeds. This harvests the loss but replaces the asset with something with the same growth potential. This is free lunch.

Better read the wiki on tax loss harvesting.
JW

Re: From "Individual" Investments to Funds and ETFs

Posted: Tue Jul 24, 2012 7:27 pm
by DualIncomeNoDebt
I will read it, thank you.

Re: From "Individual" Investments to Funds and ETFs

Posted: Tue Jul 24, 2012 8:59 pm
by Novine
Second what JW said. Personally, I don't see any significant rebound in natural gas stocks coming any time soon. Absent some significant shift in energy use to natural gas, there's way more supplies than demand for the foreseeable future. But JW's suggestion will allow you to make those losses work for you and still give you the option to reinvest back into natural gas if you're bound and determined to keep your money tied up that way.