pulling the trigger

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Topic Author
mitchmcc
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pulling the trigger

Post by mitchmcc »

Hello all,

I posted the other day about moving more towards a "Bogleheads" investment approach,
with the complication that I have a large portfolio that has been at Fidelity for many
years.

I have been following mostly a "dividend growth" plan for the last 4-5 years (roughly)..
I started with a "Dogs of the Dow", and also follow DGI on SeekingAlpha.com.

My problem (I know :happy ) is this:

I have quite a few big gainers that make me feel like I could weather a downturn
pretty well. This is mostly because I have held them many years!

Here are some examples (believe me, I do not pick all winners, either):

Symbol Total Gain
GE 24%
MO 194%
MO 110%
MSFT 36%
VZ 40%
DUK 172%
ED 169%
ED 46%
FBIOX 302% Select biotech
FSHCX 543% Select healthcare
GE 141%
SO 158%
WMT 10%
MO 298%
MSFT 114%
O 26%
PFE 12%
T 18%
WMT 17%
FUSVX 187% Spartan 500 Index

Big losers:

AU -58%
GERN -91%
SYMC -26%
ADM -12%
CVX -13%
GLD -28%
BLDP -94% (I just knew fuel cells were gonna be big)
QCOM -26%
RDSB -28%

While in the last few days, I have added FSITX (Spartan Bond fund), and I just moved
my 401K into a Fidelity "retirement" managed fund ( I plan to move this money to VG
when I leave this job)... But I am still pretty heavily weighted in stocks overall, despite
the big winners mentioned above (about 70%)

My speculative stocks are mostly other individual Biotech like GALE, BTX, OCX, PPHM, and
EXEL, but these are very small lots.

I am planning on (semi-) retiring next year, at age 61, but very well may do some contracting
and have the potential to make good money even working part year.

If you were in my position, with plenty of $ and these mostly solid dividend payers with
large gains, would you still sell and go to TSM, or one of the other Boglehead-recommended
funds.

Thanks,

Mitch
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nisiprius
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Re: pulling the trigger

Post by nisiprius »

I don't see any reason to make it a "pulling the trigger" situation. The Bogleheadish idea is that stocks are stocks, and if you have a big old collection of stocks you might as well make it Total Stock and save costs--because your attempts to pick winners are adding extra fluctuation, extra uncertainty, a gambling element. We tend to think that few investors are rewarded for taking that risk. Part of the idea is not to fuss about whether a portfolio is optimum, but pick something good enough and just leave well enough alone. So part of the idea is to get past any feelings of urgency, and get out of the idea that "I have to do something now."

I'm not going to try to make any specific suggestions, but rather than "pulling the trigger," why not pick some goal like "I want to get my portfolio simplified before I turn 65" and think about whether there's some sensible way to do it gradually or in steps.
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livesoft
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Re: pulling the trigger

Post by livesoft »

I'd certainly sell all the losers today.
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Topic Author
mitchmcc
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Re: pulling the trigger

Post by mitchmcc »

>>>>you might as well make it Total Stock and save costs
But I have zero costs in holding these individual stocks...., and since many of
them are Dow and/or dividend aristocrats, they are the core holdings
of any big fund, whether VG or Fidelity.
Chadnudj
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Re: pulling the trigger

Post by Chadnudj »

nisiprius wrote:I don't see any reason to make it a "pulling the trigger" situation. The Bogleheadish idea is that stocks are stocks, and if you have a big old collection of stocks you might as well make it Total Stock and save costs--because your attempts to pick winners are adding extra fluctuation, extra uncertainty, a gambling element. We tend to think that few investors are rewarded for taking that risk. Part of the idea is not to fuss about whether a portfolio is optimum, but pick something good enough and just leave well enough alone. So part of the idea is to get past any feelings of urgency, and get out of the idea that "I have to do something now."

I'm not going to try to make any specific suggestions, but rather than "pulling the trigger," why not pick some goal like "I want to get my portfolio simplified before I turn 65" and think about whether there's some sensible way to do it gradually or in steps.
I think this is great advice.

What I would consider, if I were you, would be to tax loss harvest any individual stock shares you have losses in (converting over to Total Stock or Total Bond or Total International Stock after making the sales), and then stop doing automatic reinvesting of the dividends from your remaining individual shares (or use the dividends from your remaining shares if you're not doing automatic reinvesting) to continue buying Total Stock/Total Bond/Total International. Rinse and repeat.

Overtime, this will shift you towards a more simplified, more traditional Boglehead index fund portfolio.
JW-Retired
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Re: pulling the trigger

Post by JW-Retired »

livesoft wrote:I'd certainly sell all the losers today.
Yes. How come you are not harvesting your losses OP?
JW
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livesoft
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Re: pulling the trigger

Post by livesoft »

^It could be these losing stocks are held in a Roth IRA. It is behaviorally so very very difficult to sell losers in a Roth IRA.
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john94549
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Re: pulling the trigger

Post by john94549 »

Having (personally) just gone through the angst of selling positions in the family trust, I can attest to how difficult it is. Were it my decision, I'd pull the trigger on everything and call it a very successful investing career, overall.

Hint: if you do "pull the trigger", never, ever, pull up the portfolio again.
carolinaman
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Re: pulling the trigger

Post by carolinaman »

Chadnudj wrote:
nisiprius wrote:I don't see any reason to make it a "pulling the trigger" situation. The Bogleheadish idea is that stocks are stocks, and if you have a big old collection of stocks you might as well make it Total Stock and save costs--because your attempts to pick winners are adding extra fluctuation, extra uncertainty, a gambling element. We tend to think that few investors are rewarded for taking that risk. Part of the idea is not to fuss about whether a portfolio is optimum, but pick something good enough and just leave well enough alone. So part of the idea is to get past any feelings of urgency, and get out of the idea that "I have to do something now."

I'm not going to try to make any specific suggestions, but rather than "pulling the trigger," why not pick some goal like "I want to get my portfolio simplified before I turn 65" and think about whether there's some sensible way to do it gradually or in steps.
I think this is great advice.

What I would consider, if I were you, would be to tax loss harvest any individual stock shares you have losses in (converting over to Total Stock or Total Bond or Total International Stock after making the sales), and then stop doing automatic reinvesting of the dividends from your remaining individual shares (or use the dividends from your remaining shares if you're not doing automatic reinvesting) to continue buying Total Stock/Total Bond/Total International. Rinse and repeat.

Overtime, this will shift you towards a more simplified, more traditional Boglehead index fund portfolio.
I agree with these recommendations. You should be able to offset some of your gains by selling losers. Taxes are a big consideration and you want to avoid higher ordinary, dividend and CG rates and certain other threshholds, i.e. itemized deduction limitations, etc. if that is possible. So definitely do tax planning to minimize the taxes in achieving your goal of a simple portfolio. If you have a lot of money in FUSVX, you may want to keep it as it fits what most Bogleheads want to do.
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Toons
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Re: pulling the trigger

Post by Toons »

I would hold for 10 more years. :happy
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whodidntante
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Re: pulling the trigger

Post by whodidntante »

My stock picks have done very well. I have no assurance that will continue. I personally don't bet my retirement on my stock picking ability. You'll have to decide what you want to do with your money. You could reserve a modest percentage of your portfolio for stock picks, if that is something you want to do. That's how I go about it.
john94549
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Re: pulling the trigger

Post by john94549 »

whodidntante wrote:My stock picks have done very well. I have no assurance that will continue. I personally don't bet my retirement on my stock picking ability. You'll have to decide what you want to do with your money. You could reserve a modest percentage of your portfolio for stock picks, if that is something you want to do. That's how I go about it.
My thoughts, exactly. The easiest part of investing, it seems, is accumulating. The hardest part is selling. As I noted above, every day, every week, every month, every year, it's a dice-roll. At some point in time, you just have to walk away from the craps table. You can either do it while you're "up", or you can do it regretting you ever walked into the casino. Remember the gambler's lament: "Please, Lord, just make me break even." It is ever so much easier to sell into a rising market.

The consensus appears to be to limit one's gambling urges to no more than 5% of investable assets (i.e., a "fun money" account). One's retirement funds should be parked conservatively, and a healthy dollop in "ready reserve" cash on the side.
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Dale_G
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Re: pulling the trigger

Post by Dale_G »

Mitch, you give no indication of the size of these positions. That's okay, but you have to do a little homework.

Determine the cost basis of each of your holdings, then sell all of the losers - and then sell at least portions of the gainers to the extent you are willing to realized net capital gains. Invest the proceeds in a broad market index.

When the remaining stocks issue dividends, invest the dividends in the broad market fund.

This amounts to "pulling the trigger" in a tax friendly way.

Dale
Volatility is my friend
john94549
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Re: pulling the trigger

Post by john94549 »

Dale, while I agree with your concept, the idea of harvesting is somewhat mind-boggling.
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Dale_G
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Re: pulling the trigger

Post by Dale_G »

John, this is not tax loss harvesting. It is selling both winning and losing stocks and investing the proceeds in a broad market fund. No capital gains tax will be due if the losses are equal to or greater than the gains. It is a very simple procedure. No deep thought is required.

Dale
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john94549
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Re: pulling the trigger

Post by john94549 »

Dale_G wrote:John, this is not tax loss harvesting. It is selling both winning and losing stocks and investing the proceeds in a broad market fund. No capital gains tax will be due if the losses are equal to or greater than the gains. It is a very simple procedure. No deep thought is required.

Dale
Dale, have you ever tried to calculate LTCG on one stock held for over 40 years, much less many such stocks? Why do you imagine many folks just throw in the towel and leave it all to the kids? Step-up in basis is the best friend tax procrastinators ever had.

For your joke of the day, several years back, I asked Waddell & Reed to help figure out what my capital gains might be on a fund held for some 40+ years (UNSCX). It took a very concerted effort by a very nice lady several days (at no expense to me) to "pencil out" the result. I suspect deep thought was required. Neither she nor I had anything better to do at the moment.
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whodidntante
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Re: pulling the trigger

Post by whodidntante »

john94549 wrote:
whodidntante wrote:My stock picks have done very well. I have no assurance that will continue. I personally don't bet my retirement on my stock picking ability. You'll have to decide what you want to do with your money. You could reserve a modest percentage of your portfolio for stock picks, if that is something you want to do. That's how I go about it.
My thoughts, exactly. The easiest part of investing, it seems, is accumulating. The hardest part is selling. As I noted above, every day, every week, every month, every year, it's a dice-roll. At some point in time, you just have to walk away from the craps table. You can either do it while you're "up", or you can do it regretting you ever walked into the casino. Remember the gambler's lament: "Please, Lord, just make me break even." It is ever so much easier to sell into a rising market.

The consensus appears to be to limit one's gambling urges to no more than 5% of investable assets (i.e., a "fun money" account). One's retirement funds should be parked conservatively, and a healthy dollop in "ready reserve" cash on the side.
As may be evident from my username, I know a thing or two about gambling. :greedy
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Dale_G
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Re: pulling the trigger

Post by Dale_G »

john94549 wrote:
Dale_G wrote:John, this is not tax loss harvesting. It is selling both winning and losing stocks and investing the proceeds in a broad market fund. No capital gains tax will be due if the losses are equal to or greater than the gains. It is a very simple procedure. No deep thought is required.

Dale
Dale, have you ever tried to calculate LTCG on one stock held for over 40 years, much less many such stocks? Why do you imagine many folks just throw in the towel and leave it all to the kids? Step-up in basis is the best friend tax procrastinators ever had.

For your joke of the day, several years back, I asked Waddell & Reed to help figure out what my capital gains might be on a fund held for some 40+ years (UNSCX). It took a very concerted effort by a very nice lady several days (at no expense to me) to "pencil out" the result. I suspect deep thought was required. Neither she nor I had anything better to do at the moment.
Well it might be difficult if you don't bother to keep records - or the house burns down or is blown away by a tornado, otherwise it should be simple even if your brokerage/mutual fund doesn't track the cost for you. When I buy a home or a stock or a mutual fund I know that I may eventually sell it, and I will have the responsibility to accurately the cost basis to determine any gains.

I am assuming the OP is a responsible taxpayer/investor who can determine his cost basis. If not, that is a lesson to be learned.

Dale
Volatility is my friend
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Dale_G
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Re: pulling the trigger

Post by Dale_G »

Dale_G wrote:
john94549 wrote:
Dale_G wrote:John, this is not tax loss harvesting. It is selling both winning and losing stocks and investing the proceeds in a broad market fund. No capital gains tax will be due if the losses are equal to or greater than the gains. It is a very simple procedure. No deep thought is required.

Dale
Dale, have you ever tried to calculate LTCG on one stock held for over 40 years, much less many such stocks? Why do you imagine many folks just throw in the towel and leave it all to the kids? Step-up in basis is the best friend tax procrastinators ever had.

For your joke of the day, several years back, I asked Waddell & Reed to help figure out what my capital gains might be on a fund held for some 40+ years (UNSCX). It took a very concerted effort by a very nice lady several days (at no expense to me) to "pencil out" the result. I suspect deep thought was required. Neither she nor I had anything better to do at the moment.
Well it might be difficult if you don't bother to keep records - or the house burns down or is blown away by a tornado, otherwise it should be simple even if your brokerage/mutual fund doesn't track the cost for you. When I buy a home or a stock or a mutual fund I know that I may eventually sell it, and I will have the responsibility to accurately report the cost basis to determine any gains.

I am assuming the OP is a responsible taxpayer/investor who can determine his cost basis. If not, that is a lesson to be learned.

Dale
Volatility is my friend
john94549
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Re: pulling the trigger

Post by john94549 »

Dale, were I to have sold this fund, "flummoxed" would be a good word to have described my attempt to calculate my LTCG. Mind you, I always attempt to pay my fair share of taxes. Whether covered or uncovered, I calculate my LTCG and pay appropriately. However, there is a point in time where it gets ridiculous. I suspect the nice lady at Waddell thought likewise.
SGM
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Re: pulling the trigger

Post by SGM »

I have been in this situation and have been selling some stock over several years. The tax cost of selling at once could be large. As a general rule sell the losers and decrease any of your larger holdings first. Decide for yourself how much capital gains you want to pay this year and in later years. Holding individual stocks has no ongoing expense, but one idea is to decrease your risk of being too concentrated in any single stock.

If you have a legacy motive you may want to keep some stocks with large capital gains to pass on at a stepped up basis. If you make charitable donations, you may want to donate stocks that have large capital gains.
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mitchmcc
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Re: pulling the trigger

Post by mitchmcc »

Thanks to all who replied.

The one answer I sort-of expected to see, but did not, is:

"If you have good companies that pay a dividend, and your yield is high because
you bought them and have held them for many years, just hang on to them".

While it is true that even Dow stocks could go out of business, barring some
type of world-wide catastophe (TEOCAWKI), it does not seem likely.

I am committed to moving to a simpler scheme, and all of these answers
have helped me understand the issues.

So I am not really ever "picking stocks".. even if I rebalanced like "Dogs of the Dow",
you are simply exchanging one DJ for another.

Mitch
tibbitts
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Re: pulling the trigger

Post by tibbitts »

mitchmcc wrote:Thanks to all who replied.

The one answer I sort-of expected to see, but did not, is:

"If you have good companies that pay a dividend, and your yield is high because
you bought them and have held them for many years, just hang on to them".

While it is true that even Dow stocks could go out of business, barring some
type of world-wide catastophe (TEOCAWKI), it does not seem likely.

I am committed to moving to a simpler scheme, and all of these answers
have helped me understand the issues.

So I am not really ever "picking stocks".. even if I rebalanced like "Dogs of the Dow",
you are simply exchanging one DJ for another.

Mitch
Like a lot of people, you wanted someone to tell you it's ok to do what you're going to do anyway, and that's okay.

I was going to reply in more length, but instead I'm going out to to buy a nice meal with my U.S. Leather dividend check. It's about a hundred years late, but I'm sure it'll come today.
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midareff
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Re: pulling the trigger

Post by midareff »

livesoft wrote:I'd certainly sell all the losers today.

and sell a corresponding amount of gain and put the proceeds of both actions into a Boglehead's portfolio. Next step would be directing all dividends and distributions towards furthering the BH portfolio.

I don't see a problem having a few dividend aristocrats and solid blue chip stocks as part of a portfolio, especially if selling creates a tax burden, which your winners would. One day there will be another 40% decline and it may provide a much more accommodation tax picture to make further changes.
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Re: pulling the trigger

Post by dratkinson »

midareff wrote:
livesoft wrote:I'd certainly sell all the losers today.

and sell a corresponding amount of gain ....
+1

Because in the year received, losses offset gains dollar-for-dollar. In following years, any carryover loss is used up at $3K/yr. So much better to offset losses and gains in the same year to more quickly get to your desired portfolio.
d.r.a., not dr.a. | I'm a novice investor; you are forewarned.
Lynette
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Re: pulling the trigger

Post by Lynette »

.....
Last edited by Lynette on Wed Dec 06, 2017 4:12 pm, edited 1 time in total.
livesoft
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Re: pulling the trigger

Post by livesoft »

Folks, we don't know if the losers are held in a taxable account or not, do we? If not, then don't get too excited about deducting losses. Nevertheless, they should be sold.
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JoinToday
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Re: pulling the trigger

Post by JoinToday »

I was in this position approx 10 years ago. I bought individual stocks in the mid 80's, and frankly, didn't track them at all. Fast forward 20 years, with spinoffs, mergers, etc, it was a mess. I didn't actually recognize some of the holdings. Sold it all over 2 days, and it felt like a weight was lifted off of my shoulders. Could not have felt better! Felt even better a year or two later when I saw that my largest holding (40% of my individual stock holdings :shock: ) had dropped greater than 90% of its value. Talk about dodging the bullet.

This is my advice: You are not going to escape paying tax on the gains unless you remain in the 15% bracket.
(1) If you can sell the stock while in the 15% bracket (0% LTCG), this is the best solution. Maybe need to sell over a few years if the gains are large.
(2) If you are solidly in the 25% bracket and are paying 15% LTCG rate, just sell as much as you can without triggering AMT.
mitchmcc wrote:>>>>you might as well make it Total Stock and save costs
But I have zero costs in holding these individual stocks...., and since many of
them are Dow and/or dividend aristocrats, they are the core holdings
of any big fund, whether VG or Fidelity.
Sigma for the individual holdings is much larger than sigma for the total stock market. The "cost" to be concerned with is not the expense ratio, but a drop in value. When I was faced with this decision 10 years ago, the stock market was within a few percent of an all time high, similar to what it is today. What better time is it to sell? Would you feel better selling after the S&P 500 drops 25%, and some of your holdings have dropped 50%?
I wish I had learned about index funds 25 years ago
john94549
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Re: pulling the trigger

Post by john94549 »

In my Trust, I just sold. Frankly, were it I, I'd sell everything and buy CDs.
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Re: pulling the trigger

Post by anoop »

john94549 wrote:In my Trust, I just sold. Frankly, were it I, I'd sell everything and buy CDs.
No bonds?
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