Should I hold on to my Apple stock?

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rgs92
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Should I hold on to my Apple stock?

Post by rgs92 » Tue May 10, 2016 11:19 am

Should I hold on to my 130 shares of Apple stock? I have owned it for about 4 years and it actually is nicely positive since I bought it, but is of course far down (about 25%) from its peak. It is only about 1% of my retirement portfolio. It is in a non-Roth IRA. I bought at the equivalent of $72/share.
It has about a 2.5% dividend yield if that makes any difference.

(By the way, as I like to look at the history of consumer technology, I love this site for perspective where you can browse through old Radio Shack catalogs. I have no association with this site, I just found it by chance and thought others here would enjoy it.)

http://www.radioshackcatalogs.com/catal ... ctory.html

TonyDAntonio
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Re: Should I hold on to my Apple stock?

Post by TonyDAntonio » Tue May 10, 2016 11:26 am

Yes (opinion worth the price you paid for it). I bought more last week with my AT&T and VZ dividends. I own about 320 shares. You get a 2% dividend to wait around for the Iphone 7 or whatever else Apple can come up with. Doubt if Apple will ever be as popular as it was with Jobs but it should go up during its product cycles. I have no great info on this, btw, just spiff-balling.

rgs92
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Re: Should I hold on to my Apple stock?

Post by rgs92 » Tue May 10, 2016 11:29 am

Interesting. I have T and VZ too like you do.

ruud
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Re: Should I hold on to my Apple stock?

Post by ruud » Tue May 10, 2016 11:42 am

If hypothetically instead of the Apple stock, you had $11,200 sitting in that account as cash, would you buy Apple stock with it? If so, hold on to it. If you wouldn't use the $11k to buy Apple stock, sell it and buy what you would've bought with the $11k.
"A good plan, violently executed now, is better than a perfect plan next week."

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David Jay
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Re: Should I hold on to my Apple stock?

Post by David Jay » Tue May 10, 2016 11:55 am

ruud wrote:If hypothetically instead of the Apple stock, you had $11,200 sitting in that account as cash, would you buy Apple stock with it? If so, hold on to it. If you wouldn't use the $11k to buy Apple stock, sell it and buy what you would've bought with the $11k.
Excellent test!
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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coachz
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Re: Should I hold on to my Apple stock?

Post by coachz » Tue May 10, 2016 12:03 pm

But what he bought high at 128, it's now at 93 and he would not buy it back at 93 if he had the cash today, BUT he has no idea what else to buy that's better.

staybalanced
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Re: Should I hold on to my Apple stock?

Post by staybalanced » Tue May 10, 2016 12:04 pm

What are your other investments? Apple makes up almost 3% of the vanguard total stock market index. So I guess, most on the forum own some apple....ha

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tludwig23
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Re: Should I hold on to my Apple stock?

Post by tludwig23 » Tue May 10, 2016 12:05 pm

You do understand you are taking uncompensated risk, yes?
That's what I do: I drink, and I know things. --Tyrion Lannister

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tludwig23
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Re: Should I hold on to my Apple stock?

Post by tludwig23 » Tue May 10, 2016 12:06 pm

coachz wrote:But what he bought high at 128, it's now at 93 and he would not buy it back at 93 if he had the cash today, BUT he has no idea what else to buy that's better.
He would get a better risk/return with Vanguard Total Stock Market Index Fund.
That's what I do: I drink, and I know things. --Tyrion Lannister

rgs92
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Re: Should I hold on to my Apple stock?

Post by rgs92 » Tue May 10, 2016 12:11 pm

I am mostly (85% to 90%) in the total stock market index (and a little international index) for my equity portfolio.
I have always kept a handful of individual stocks out of habit over the decades (and I have done pretty well).
But I know better than to get arrogant and go overboard. It's just fun for me.
I just felt that Apple was a good value in terms of P/E and yield and wanted to ask what people here thought.
I certainly know that buying individual stocks is not the Boglehead way so apologies in advance and I hope the moderator doesn't mind.
I did try to make my question actionable.
Last edited by rgs92 on Tue May 10, 2016 12:17 pm, edited 2 times in total.

Da5id
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Re: Should I hold on to my Apple stock?

Post by Da5id » Tue May 10, 2016 12:12 pm

I don't personally think investing in individual stocks is a winning game for most of us (certainly not for me, never tried it, never plan on doing so). Obviously you do, so I guess the answer is to evaluate Apple by whatever criteria you use for picking stocks to purchase. Based on that analysis, the choice to sell or hold should be clear enough.

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coachz
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Re: Should I hold on to my Apple stock?

Post by coachz » Tue May 10, 2016 12:14 pm

tludwig23 wrote:
coachz wrote:But what he bought high at 128, it's now at 93 and he would not buy it back at 93 if he had the cash today, BUT he has no idea what else to buy that's better.
He would get a better risk/return with Vanguard Total Stock Market Index Fund.
So you would tell him to sell at a loss and put it in the index? What if he had $100k, now down $30k, same advice ?

staybalanced
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Re: Should I hold on to my Apple stock?

Post by staybalanced » Tue May 10, 2016 12:15 pm

rgs92 wrote:I am mostly (85% to 90%) in the total stock market index (and a little international index) for my equity portfolio.
I have always kept a handful of individual stocks out of habit over the decades (and I have done pretty well).
But I know better than to get arrogant and go overboard. It's just fun for me.
I would sell it, there is no reason to own it. I do mutual index funds, but I do pay attention. All I have heard for a couple years is that the market is not pricing apple correctly, and it has done poorly. Maybe the market knows more than we do....I honestly wish it wasn't the number 1 holding in total stock index, but it will sort itself out sooner or later.

staybalanced
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Re: Should I hold on to my Apple stock?

Post by staybalanced » Tue May 10, 2016 12:17 pm

coachz wrote:
tludwig23 wrote:
coachz wrote:But what he bought high at 128, it's now at 93 and he would not buy it back at 93 if he had the cash today, BUT he has no idea what else to buy that's better.
He would get a better risk/return with Vanguard Total Stock Market Index Fund.
So you would tell him to sell at a loss and put it in the index? What if he had $100k, now down $30k, same advice ?
The 30k is gone. So what? Why is it always assumed that individual stocks come back. The market has always trended upwards, but the underlying companies change pretty regularly. Go look at top ten s&p 500 companies vs 10 years ago. It's different. It will be different 10 years from now.

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tludwig23
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Re: Should I hold on to my Apple stock?

Post by tludwig23 » Tue May 10, 2016 12:18 pm

coachz wrote:
tludwig23 wrote:
coachz wrote:But what he bought high at 128, it's now at 93 and he would not buy it back at 93 if he had the cash today, BUT he has no idea what else to buy that's better.
He would get a better risk/return with Vanguard Total Stock Market Index Fund.
So you would tell him to sell at a loss and put it in the index? What if he had $100k, now down $30k, same advice ?
Same advice. It's worth now what it's worth now. Basis is irrelevant when in a tax-sheltered account and capital gains, losses, harvesting, etc. are not a concern.
$100 of Apple stock is worth the same as $100 of VTI or $100 of gold or $100 of forever stamps, or any other liquid asset.
That's what I do: I drink, and I know things. --Tyrion Lannister

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coachz
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Re: Should I hold on to my Apple stock?

Post by coachz » Tue May 10, 2016 12:20 pm

InvestorAdam wrote:
rgs92 wrote:I am mostly (85% to 90%) in the total stock market index (and a little international index) for my equity portfolio.
I have always kept a handful of individual stocks out of habit over the decades (and I have done pretty well).
But I know better than to get arrogant and go overboard. It's just fun for me.
I would sell it, there is no reason to own it. I do mutual index funds, but I do pay attention. All I have heard for a couple years is that the market is not pricing apple correctly, and it has done poorly. Maybe the market knows more than we do....I honestly wish it wasn't the number 1 holding in total stock index, but it will sort itself out sooner or later.
Since it's #1 holding in total stock, selling it and buying total stock index seems like not much change from owning it.

staybalanced
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Re: Should I hold on to my Apple stock?

Post by staybalanced » Tue May 10, 2016 12:25 pm

there is a difference, he is currently over weight apple, he would be at market weight post sale. Market cap indexes work.

inbox788
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Re: Should I hold on to my Apple stock?

Post by inbox788 » Tue May 10, 2016 12:28 pm

tludwig23 wrote:
coachz wrote:
tludwig23 wrote:
coachz wrote:But what he bought high at 128, it's now at 93 and he would not buy it back at 93 if he had the cash today, BUT he has no idea what else to buy that's better.
He would get a better risk/return with Vanguard Total Stock Market Index Fund.
So you would tell him to sell at a loss and put it in the index? What if he had $100k, now down $30k, same advice ?
Same advice. It's worth now what it's worth now. Basis is irrelevant when in a tax-sheltered account and capital gains, losses, harvesting, etc. are not a concern.
$100 of Apple stock is worth the same as $100 of VTI or $100 of gold or $100 of forever stamps, or any other liquid asset.
+1!

No taxable gain since it's in a tIRA, and if there were a loss, I don't think there's a TLH opportunity, so pretty much simple decision. I'm indifferent to what to do. You have some attachment, and there's not much harm, so keep it. Someday, if you want life to be a little more simple, sell it and consolidate it into a low cost index.
coachz wrote:Since it's #1 holding in total stock, selling it and buying total stock index seems like not much change from owning it.
It's a HUGE change from 100% AAPL to 3% AAPL and 97% diversified. (VTI vs. AAPL)

It's an INSIGNIFICANT change from 99% diversified (96% other/3% AAPL) + 1% AAPL == 96% other/4% AAPL to 97% other/3% AAPL. (OP holdings)

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coachz
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Re: Should I hold on to my Apple stock?

Post by coachz » Tue May 10, 2016 12:31 pm

But if the Apple stock is held in a Roth IRA then TLH does not apply.

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jhfenton
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Re: Should I hold on to my Apple stock?

Post by jhfenton » Tue May 10, 2016 12:39 pm

InvestorAdam wrote:What are your other investments? Apple makes up almost 3% of the vanguard total stock market index. So I guess, most on the forum own some apple....ha
According to Morningstar's portfolio x-ray stock intersection tool, 0.05% of our portfolio is in Apple!

That 0.05% comes via a Fidelity institutional S&P 500 fund in my 401(k) that is 1.67% of our portfolio. The rest of our large cap exposure (15.74%) is in a large value fund that holds no Apple. (This amount will grow slowly as I'm now being forced to spread my 401(k) money around to a few funds to keep our overall allocation in balance.)

I happen to think that Apple is a good buy at current prices, but it does have high single product risk, which I believe is the reason it has remained very cheap from a P/E perspective. I don't generally buy individual stocks because I don't have any special ability to pick them.
Last edited by jhfenton on Tue May 10, 2016 12:40 pm, edited 1 time in total.

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queso
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Re: Should I hold on to my Apple stock?

Post by queso » Tue May 10, 2016 12:40 pm

I'm stuck with it too. I bought at around $49 per share and have been just sitting on it since I don't feel like eating the capital gains. I thought I might tax harvest it against something else, but I don't have enough losses to cover the approx. 88% gain on AAPL. I'd like to move it into VTSAX. Oh well, good problem to have in the grand scheme of things I suppose.

TonyDAntonio
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Re: Should I hold on to my Apple stock?

Post by TonyDAntonio » Tue May 10, 2016 12:48 pm

What does this mean?
tludwig23 wrote:You do understand you are taking uncompensated risk, yes?

staybalanced
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Re: Should I hold on to my Apple stock?

Post by staybalanced » Tue May 10, 2016 12:51 pm

TonyDAntonio wrote:What does this mean?
tludwig23 wrote:You do understand you are taking uncompensated risk, yes?
An increase in risk without an increase in expected return.

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Re: Should I hold on to my Apple stock?

Post by inbox788 » Tue May 10, 2016 1:17 pm

jhfenton wrote:According to Morningstar's portfolio x-ray stock intersection tool, 0.05% of our portfolio is in Apple!
You're underweight AAPL. What else are you underweight?

I was underweight AAPL during some boom AAPL years, so my ex-AAPL portion of the portfolio had to outperform just to keep up with Total Market.

Individual stocks are a two edge sword. They can perform well if they include the big winners, but when you miss out on some of the big winners, they can lag. Is it luck or skill that you've picked the right stocks? I used to think it was more skill than luck, but now I believe it's more luck than skill. Do you have NFLX, TSLA, FB or AMZN?

TonyDAntonio
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Re: Should I hold on to my Apple stock?

Post by TonyDAntonio » Tue May 10, 2016 1:18 pm

So I "might" be taking uncompensated risk?
I will definitely post back with my compensation level when I sell my Apple stock.
It seems that only then will we be able to state as a fact if I was taking uncompensated risk or not.

InvestorAdam wrote:
TonyDAntonio wrote:What does this mean?
tludwig23 wrote:You do understand you are taking uncompensated risk, yes?
An increase in risk without an increase in expected return.

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Re: Should I hold on to my Apple stock?

Post by Nowizard » Tue May 10, 2016 1:27 pm

If you have other funds, you already own other Apple shares, so if you wish to overweight or consider the small investment, percentage-wise, to be one where getting the dividend while waiting for hopeful appreciation of the stock price, hang on. I definitely am doing so.

Tim

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Re: Should I hold on to my Apple stock?

Post by tludwig23 » Tue May 10, 2016 2:05 pm

TonyDAntonio wrote:So I "might" be taking uncompensated risk?
I will definitely post back with my compensation level when I sell my Apple stock.
It seems that only then will we be able to state as a fact if I was taking uncompensated risk or not.

InvestorAdam wrote:
TonyDAntonio wrote:What does this mean?
tludwig23 wrote:You do understand you are taking uncompensated risk, yes?
An increase in risk without an increase in expected return.
I suppose that it is a matter a semantics. The expected return of AAPL is the same as the expected return of the market (or maybe of large growth stocks), but the standard deviation is higher. That higher standard deviation is uncompensated risk. Risk can, of course, pay off, as many stocks will do better than the market average. The evidence is crystal clear: stock picking may add a small bit of excess return versus the whole market, but this small bit is more than made up for by transaction costs. You may get lucky, as in any form of gambling.
That's what I do: I drink, and I know things. --Tyrion Lannister

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Re: Should I hold on to my Apple stock?

Post by azanon » Tue May 10, 2016 2:24 pm

InvestorAdam wrote:
TonyDAntonio wrote:What does this mean?
tludwig23 wrote:You do understand you are taking uncompensated risk, yes?
An increase in risk without an increase in expected return.
But by owning one stock, he has a small chance of a "lights-out" return that you wouldn't get in a large index. So how much does that chance cost? If its anything other than free, maybe he's not as uncompensated as you're implying.

This reminds me of lottery discussions. If you play you have some chance, if you don't play you have no chance. And those tickets aren't free either.

Now don't get me wrong, I'm not advocating individual stocks at all. But I will acknowledge the few virtues that they do have over my "own everything" approach to investing.

btenny
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Re: Should I hold on to my Apple stock?

Post by btenny » Tue May 10, 2016 2:29 pm

No I would definitely find a place to exit. IMO a mostly hardware company like Apple is doomed in the long run. The issue I have is technical computer companies turn over about every 20 years or so to some new technology. Remember NCR, CDC, Digital, Compaq and many others who are gone completely or not in control of their destiny any longer. Companies like IBM and Xerox still make lots of stuff but have basically exited the computer business.

So I see Apple slowly losing their dominance in markets to other competitors. This already happened in PCs. Microsoft and partners won. Apple lost. Yes they have some market share in computers but that is going slowly away. They got lucky with the IPhone and IPod and stayed alive. Right now they are losing phone market share and dominance to Korea and others. There are doing OK now by selling lots of applications and songs, another new market. So where are they going to make money in 5 years? What new market have they got going? Google Pay seems just as good as Apple Pay so that doesn't look promising. Plus both have to contend with Visa and MasterCard and AMEX. Where is Amazon in all this stuff? Everyone is doing car stuff. So I am not sure they will get lucky again with Steve Jobs gone.

Just my Opinion.

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Re: Should I hold on to my Apple stock?

Post by mickens16 » Tue May 10, 2016 2:35 pm

It's 1% of your portfolio. I wouldn't even worry about to tell you the truth. As you continue piling money into index funds/ETF's this position will continue to drop. Many Bogleheads have no problem with having up to 5% of your investments as play money. Just consider AAPL play money.

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Re: Should I hold on to my Apple stock?

Post by tludwig23 » Tue May 10, 2016 2:42 pm

azanon wrote: But by owning one stock, he has a small chance of a "lights-out" return that you wouldn't get in a large index. So how much does that chance cost? If its anything other than free, maybe he's not as uncompensated as you're implying.

This reminds me of lottery discussions. If you play you have some chance, if you don't play you have no chance. And those tickets aren't free either.

Now don't get me wrong, I'm not advocating individual stocks at all. But I will acknowledge the few virtues that they do have over my "own everything" approach to investing.
I don't think you understand the definition of unsystematic or uncompensated risk. The risk is not "compensated" if the stock does really well and "uncompensated" if it does not, rather the term is based on expectations. The are, of course, may types of risk. For example, high-yield bonds have credit risk--a higher expected rate of default. One is compensated for taking this risk with higher yields. Longer term nominal treasury bonds have inflation risk, but compared with a TIPS bond of the same duration they have higher interest payments--in order to compensate you for taking the inflation risk. There is no expected increased compensation for taking the risk (called business risk) of holding a single stock versus holding the market. Therefore it is an uncompensated risk.
That's what I do: I drink, and I know things. --Tyrion Lannister

TonyDAntonio
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Re: Should I hold on to my Apple stock?

Post by TonyDAntonio » Tue May 10, 2016 2:43 pm

I think you are going to be proven more right than wrong with this analysis. And I wouldn't sell here. I think Apple can go higher than low $90. I have no idea how high, though. It still makes too much money and now you have some buyers because it pays a rising (for the time being) dividend.
And I do realize that this discussion (of the buying/selling of a single stock) really is misplaced on Bogleheads. :-)
btenny wrote:No I would definitely find a place to exit. IMO a mostly hardware company like Apple is doomed in the long run. The issue I have is technical computer companies turn over about every 20 years or so to some new technology. Remember NCR, CDC, Digital, Compaq and many others who are gone completely or not in control of their destiny any longer. Companies like IBM and Xerox still make lots of stuff but have basically exited the computer business.

So I see Apple slowly losing their dominance in markets to other competitors. This already happened in PCs. Microsoft and partners won. Apple lost. Yes they have some market share in computers but that is going slowly away. They got lucky with the IPhone and IPod and stayed alive. Right now they are losing phone market share and dominance to Korea and others. There are doing OK now by selling lots of applications and songs, another new market. So where are they going to make money in 5 years? What new market have they got going? Google Pay seems just as good as Apple Pay so that doesn't look promising. Plus both have to contend with Visa and MasterCard and AMEX. Where is Amazon in all this stuff? Everyone is doing car stuff. So I am not sure they will get lucky again with Steve Jobs gone.

Just my Opinion.

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Re: Should I hold on to my Apple stock?

Post by diyfp » Tue May 10, 2016 2:49 pm

tludwig23 wrote:... many stocks will do better than the market average.
Is this true? Do you have any numbers to support this?

I thought most of the markets return is actually explained by a minority of the stocks i.e. the large majority of stocks do worse than the market average and a few high fliers are responsible for most of the market gains.

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Re: Should I hold on to my Apple stock?

Post by TonyDAntonio » Tue May 10, 2016 2:49 pm

I cannot argue the financial definition of 'uncompensated risk' with you because I haven't studied it. The layman's definition of this term, however, doesn't seem appropriate. That's all I'm saying. It took me a long time to realize that a lot of financial terms that sounded like fact were really part of a psuedo-science language, very similar (but different) to religion (as this reformed ex-catholic has noticed over his lifetime). :-)
tludwig23 wrote:
azanon wrote: But by owning one stock, he has a small chance of a "lights-out" return that you wouldn't get in a large index. So how much does that chance cost? If its anything other than free, maybe he's not as uncompensated as you're implying.

This reminds me of lottery discussions. If you play you have some chance, if you don't play you have no chance. And those tickets aren't free either.

Now don't get me wrong, I'm not advocating individual stocks at all. But I will acknowledge the few virtues that they do have over my "own everything" approach to investing.
I don't think you understand the definition of unsystematic or uncompensated risk. The risk is not "compensated" if the stock does really well and "uncompensated" if it does not, rather the term is based on expectations. The are, of course, may types of risk. For example, high-yield bonds have credit risk--a higher expected rate of default. One is compensated for taking this risk with higher yields. Longer term nominal treasury bonds have inflation risk, but compared with a TIPS bond of the same duration they have higher interest payments--in order to compensate you for taking the inflation risk. There is no expected increased compensation for taking the risk (called business risk) of holding a single stock versus holding the market. Therefore it is an uncompensated risk.

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Re: Should I hold on to my Apple stock?

Post by TonyDAntonio » Tue May 10, 2016 2:57 pm

I'm paying no transaction costs (that I know of) since I'm buying in my Vanguard Flagship IRA (large number of free trades). And I totally agree that if I am 'compensated' it will be largely luck. I don't stay up at night pouring over Apple's financial data and I don't rely on stock picking for my overall portfolio. In fact my Apple purchase is due to the most stupid of reasons: I had some 'extra' money in my IRA and I heard Carl Ichan claim that Apple was woefully undervalued and should be priced double than it was. A year later he was completely out of Apple...some 48 million shares :-( It's been an interesting learning experience...all of this stuff.
tludwig23 wrote:
TonyDAntonio wrote:So I "might" be taking uncompensated risk?
I will definitely post back with my compensation level when I sell my Apple stock.
It seems that only then will we be able to state as a fact if I was taking uncompensated risk or not.

InvestorAdam wrote:
TonyDAntonio wrote:What does this mean?
tludwig23 wrote:You do understand you are taking uncompensated risk, yes?
An increase in risk without an increase in expected return.
I suppose that it is a matter a semantics. The expected return of AAPL is the same as the expected return of the market (or maybe of large growth stocks), but the standard deviation is higher. That higher standard deviation is uncompensated risk. Risk can, of course, pay off, as many stocks will do better than the market average. The evidence is crystal clear: stock picking may add a small bit of excess return versus the whole market, but this small bit is more than made up for by transaction costs. You may get lucky, as in any form of gambling.

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Re: Should I hold on to my Apple stock?

Post by jhfenton » Tue May 10, 2016 3:01 pm

inbox788 wrote:
jhfenton wrote:According to Morningstar's portfolio x-ray stock intersection tool, 0.05% of our portfolio is in Apple!
You're underweight AAPL. What else are you underweight?

I was underweight AAPL during some boom AAPL years, so my ex-AAPL portion of the portfolio had to outperform just to keep up with Total Market.

Individual stocks are a two edge sword. They can perform well if they include the big winners, but when you miss out on some of the big winners, they can lag. Is it luck or skill that you've picked the right stocks? I used to think it was more skill than luck, but now I believe it's more luck than skill. Do you have NFLX, TSLA, FB or AMZN?
No. No. 0.02%. 0.02%.

I have almost no domestic exposure to the growth column of the style box at the moment (except for the 5% in VGSLX/Vanguard REIT Index Admiral, which is all over the style box, but for which the style categories don't mean much). I am now slowly adding to the S&P 500 fund in my 401(k) and, soon, to VSMAX (Vanguard Small Cap Index Admiral) in my wife's new 401(k). Presently, though, I have large and small value in our Roths/IRAs and Vanguard Mid-Cap Value Index Admiral in my 401(k).

I've only ever owned three individual stocks.

My my first ever individual stock purchase (in 2000, I think) was a disaster. I bought a Nevada real estate developer that ended up going bankrupt amid allegations of fraud. The books really did look great, and the stock looked like a bargain. Only the numbers turned out to have been cooked. Fortunately, my losses were very small, and the money was well spent to steer me in the right direction.

I didn't own another individual stock until 2013. In early 2013, I bought a spin-off my company did (CONE, a data center REIT). I bought in the IPO at $19 and sold it a few months later at $24. CONE did nothing for the next year, but since 2014 it has doubled to $48. So was I smart or foolish? I made a quick 25% in 3 months, but missed out on 100% over the next 35 months.

The only other exception to my failure-inspired-no-individual-stocks rule was actually Apple, also in 2013. When Apple dropped below $400 for absurd reasons, I bought some (April and June). I sold it around 366 days later for $630ish (actually $90ish after the split). I missed another 50% run-up after that, but I had broken my own rules enough.

I've resisted all other urges that I know something better about an individual stock than the market.

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Re: Should I hold on to my Apple stock?

Post by itstoomuch » Tue May 10, 2016 3:10 pm

What I do in an individual holding (could be an Index); Determine at approximately what up and downside price (risk) would you want to sell to capture a gain or prevent a further loss. You could hedge some of this decision in a covered call option.

Us, 66/69, 85% in cash in discretionary holdings. IPS 2016, I stated to be out of Market by May 1. Stay out of Market for 9-12 months (early 2017). We are up about 3-4% since 01/2016. Have opportunity loss of about 3-5% in my sold holdings (sold holdings share price increased). This bucket is Entirely discretionary to our retirement requirements. We will have a +5% SWR at current valuations, even in a deep recession. IOW, only a fraction of our retirement valuation, is directly exposed to the Market.

YMMV.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Should I hold on to my Apple stock?

Post by azanon » Tue May 10, 2016 3:18 pm

tludwig23 wrote:
azanon wrote: But by owning one stock, he has a small chance of a "lights-out" return that you wouldn't get in a large index. So how much does that chance cost? If its anything other than free, maybe he's not as uncompensated as you're implying.

This reminds me of lottery discussions. If you play you have some chance, if you don't play you have no chance. And those tickets aren't free either.

Now don't get me wrong, I'm not advocating individual stocks at all. But I will acknowledge the few virtues that they do have over my "own everything" approach to investing.
I don't think you understand the definition of unsystematic or uncompensated risk. The risk is not "compensated" if the stock does really well and "uncompensated" if it does not, rather the term is based on expectations. The are, of course, may types of risk. For example, high-yield bonds have credit risk--a higher expected rate of default. One is compensated for taking this risk with higher yields. Longer term nominal treasury bonds have inflation risk, but compared with a TIPS bond of the same duration they have higher interest payments--in order to compensate you for taking the inflation risk. There is no expected increased compensation for taking the risk (called business risk) of holding a single stock versus holding the market. Therefore it is an uncompensated risk.
First, I'm very familiar with the terms and am glad to discuss them at length. Just because a risk in an investment is unsystemtic, doesn't necessarily mean it is uncompensated. You're equating those two, but they're not the same. Unsystemtic means the risk is diversifiable. But just because a risk is diversifiable, doesn't mean its inherently uncompensated as well if you don't in fact diversify it. I'll explain below:

The risk that is arguably uncompensated (but no doubt unsystemic) with an individual stock is namely, company risk and sector risk. What I was trying to point out, is that there is a very small chance, but extremely high expected return possibility with an individual stock that does not exist, at all, with an index fund. So that additional unsystemic risk is actually compensated to some extent, just not by very much because what you get for your money is also a very small, but still possible chance for super, outstanding performance. So if you don't think that's worth paying for, that's fine. But the operative thing that's going on here is, is that the additional risk is perhaps not sufficiently compensated, not outright uncompensated.
Last edited by azanon on Tue May 10, 2016 3:22 pm, edited 1 time in total.

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Re: Should I hold on to my Apple stock?

Post by azanon » Tue May 10, 2016 3:21 pm

TonyDAntonio wrote:I cannot argue the financial definition of 'uncompensated risk' with you because I haven't studied it. The layman's definition of this term, however, doesn't seem appropriate. That's all I'm saying. It took me a long time to realize that a lot of financial terms that sounded like fact were really part of a psuedo-science language, very similar (but different) to religion (as this reformed ex-catholic has noticed over his lifetime). :-)
tludwig23 wrote:
azanon wrote: But by owning one stock, he has a small chance of a "lights-out" return that you wouldn't get in a large index. So how much does that chance cost? If its anything other than free, maybe he's not as uncompensated as you're implying.

This reminds me of lottery discussions. If you play you have some chance, if you don't play you have no chance. And those tickets aren't free either.

Now don't get me wrong, I'm not advocating individual stocks at all. But I will acknowledge the few virtues that they do have over my "own everything" approach to investing.
I don't think you understand the definition of unsystematic or uncompensated risk. The risk is not "compensated" if the stock does really well and "uncompensated" if it does not, rather the term is based on expectations. The are, of course, may types of risk. For example, high-yield bonds have credit risk--a higher expected rate of default. One is compensated for taking this risk with higher yields. Longer term nominal treasury bonds have inflation risk, but compared with a TIPS bond of the same duration they have higher interest payments--in order to compensate you for taking the inflation risk. There is no expected increased compensation for taking the risk (called business risk) of holding a single stock versus holding the market. Therefore it is an uncompensated risk.
Never fear. I can..... :mrgreen:

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Re: Should I hold on to my Apple stock?

Post by diyfp » Tue May 10, 2016 4:28 pm

azanon wrote:...there is a very small chance, but extremely high expected return possibility with an individual stock that does not exist, at all, with an index fund. So that additional unsystemic risk is actually compensated to some extent, just not by very much because what you get for your money is also a very small, but still possible chance for super, outstanding performance. So if you don't think that's worth paying for, that's fine. But the operative thing that's going on here is, is that the additional risk is perhaps not sufficiently compensated, not outright uncompensated.
Sounds like you're talking about buying lottery tickets which is fine.

Lottery tickets have high risk and negative expected return. I would say that is 'outright uncompensated risk'.

http://www.wired.com/2016/01/the-fascin ... powerball/

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Re: Should I hold on to my Apple stock?

Post by inbox788 » Tue May 10, 2016 4:29 pm

tludwig23 wrote:The evidence is crystal clear: stock picking may add a small bit of excess return versus the whole market...
I don't disagree with most of what is said, except with this point. Where is this excess return coming from? Are you picking stocks not part of the whole market? If you're picking stocks from the whole market, is it not a zero sum game? So some folks pick winners, but other pick losers.

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Re: Should I hold on to my Apple stock?

Post by inbox788 » Tue May 10, 2016 4:42 pm

diyfp wrote:
tludwig23 wrote:... many stocks will do better than the market average.
Is this true? Do you have any numbers to support this?

I thought most of the markets return is actually explained by a minority of the stocks i.e. the large majority of stocks do worse than the market average and a few high fliers are responsible for most of the market gains.
I'd be surprised if it was a just handful of stocks that beat the market average of thousands of stocks. Just like there are a few companies that go bankrupt, a few high fliers wildly beat the average, but most hover around the average. I'd expect a small majority fail to beat the average, but still many that do beat the average, somewhere between 25-45% or roughly about 1/3. And I think this would apply whether we were talking about 1 year or 10 years. Would be interesting to see if I'm way wrong on this, so links to any studies would be helpful.

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Re: Should I hold on to my Apple stock?

Post by tludwig23 » Tue May 10, 2016 4:46 pm

azanon wrote:...expected return possibility...
You'll have to define this term. I have no idea what you mean. Are you trying to say that the distribution of expected returns is highly skewed? Or that is has a lot of kurtosis?
That's what I do: I drink, and I know things. --Tyrion Lannister

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Re: Should I hold on to my Apple stock?

Post by tludwig23 » Tue May 10, 2016 4:49 pm

inbox788 wrote:
tludwig23 wrote:The evidence is crystal clear: stock picking may add a small bit of excess return versus the whole market...
I don't disagree with most of what is said, except with this point. Where is this excess return coming from? Are you picking stocks not part of the whole market? If you're picking stocks from the whole market, is it not a zero sum game? So some folks pick winners, but other pick losers.
Some active fund managers have been able to consistently add value. While it must be a zero sum game overall, this could be at the expense of amateur individual investors. However this value added is usually cancelled out by the extra costs.
That's what I do: I drink, and I know things. --Tyrion Lannister

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Re: Should I hold on to my Apple stock?

Post by Jags4186 » Tue May 10, 2016 4:53 pm

David Jay wrote:
ruud wrote:If hypothetically instead of the Apple stock, you had $11,200 sitting in that account as cash, would you buy Apple stock with it? If so, hold on to it. If you wouldn't use the $11k to buy Apple stock, sell it and buy what you would've bought with the $11k.
Excellent test!
I hate this. Dave Ramsey spouts this all the time. Yes, maybe in a vacuum, you would do this. But you also have capital gains on these and would have to pay taxes when you sell. Now it won't be a lot (15% on $2600 or so), but you are essentially throwing away $400 on taxes. If its 1% of your portfolio and you like it, I would just keep it. When you begin to sell of assets to fund your lifestyle, these stragglers are the first to go.

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Re: Should I hold on to my Apple stock?

Post by tludwig23 » Tue May 10, 2016 5:24 pm

Jags4186 wrote:
David Jay wrote:
ruud wrote:If hypothetically instead of the Apple stock, you had $11,200 sitting in that account as cash, would you buy Apple stock with it? If so, hold on to it. If you wouldn't use the $11k to buy Apple stock, sell it and buy what you would've bought with the $11k.
Excellent test!
I hate this. Dave Ramsey spouts this all the time. Yes, maybe in a vacuum, you would do this. But you also have capital gains on these and would have to pay taxes when you sell. Now it won't be a lot (15% on $2600 or so), but you are essentially throwing away $400 on taxes. If its 1% of your portfolio and you like it, I would just keep it. When you begin to sell of assets to fund your lifestyle, these stragglers are the first to go.
It's in an IRA. But your point is well taken... Outside an IRA taxes definitely matter.
That's what I do: I drink, and I know things. --Tyrion Lannister

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Re: Should I hold on to my Apple stock?

Post by Jags4186 » Tue May 10, 2016 5:40 pm

tludwig23 wrote:
Jags4186 wrote:
David Jay wrote:
ruud wrote:If hypothetically instead of the Apple stock, you had $11,200 sitting in that account as cash, would you buy Apple stock with it? If so, hold on to it. If you wouldn't use the $11k to buy Apple stock, sell it and buy what you would've bought with the $11k.
Excellent test!
I hate this. Dave Ramsey spouts this all the time. Yes, maybe in a vacuum, you would do this. But you also have capital gains on these and would have to pay taxes when you sell. Now it won't be a lot (15% on $2600 or so), but you are essentially throwing away $400 on taxes. If its 1% of your portfolio and you like it, I would just keep it. When you begin to sell of assets to fund your lifestyle, these stragglers are the first to go.
It's in an IRA. But your point is well taken... Outside an IRA taxes definitely matter.
Whoops! I read "non-Roth IRA" and assumed that meant taxable. My bad. In that case yes, I'd sell and buy my preferred index fund of choice.

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Re: Should I hold on to my Apple stock?

Post by stm » Tue May 10, 2016 5:47 pm

I know that I'll get castigated for this but I'm heavily overweight on Apple stock. Much came from a random, blind luck (I'll admit this) purchase years ago but it's now like 33% of my small portfolio. Never really wanted to pay the capital gains, and the dividends go towards my kids' coverdell accounts. The overdependence on the iPhone is a big problem for them. The 7 will be a defining moment or perhaps yet another cycle in the yoyo who knows? :?

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Re: Should I hold on to my Apple stock?

Post by inbox788 » Tue May 10, 2016 7:03 pm

tludwig23 wrote:
inbox788 wrote:
tludwig23 wrote:The evidence is crystal clear: stock picking may add a small bit of excess return versus the whole market...
I don't disagree with most of what is said, except with this point. Where is this excess return coming from? Are you picking stocks not part of the whole market? If you're picking stocks from the whole market, is it not a zero sum game? So some folks pick winners, but other pick losers.
Some active fund managers have been able to consistently add value. While it must be a zero sum game overall, this could be at the expense of amateur individual investors. However this value added is usually cancelled out by the extra costs.
My assumption is OP isn't a talented active fund manager and is actually an amateur individual investor. So besides the extra costs from investing, he gets the double whammy of being taken by the talented active fund managers. Untalented or unlucky active fund managers are in the same boat as amateur individual investors. If only I knew how to spot talent ahead of time. My limited ability to spot such talent and also limited ability to pick winning stocks makes me resigned to BH style investing.

As far as Apple, I recently bought some in my speculative/gambling account betting on earnings (I lost). My expectation was the disappointment in iPhone 6S numbers was already baked into the price, already down about 5%. I'm holding on for now expecting some recovery, hoping iPhone SE numbers are better than expected. It's a terrific phone, and I've considered trading in my 6 for it. I had considered trading the 6 for a 5S because it's uncomfortable in my front pocket.

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Re: Should I hold on to my Apple stock?

Post by anoop » Tue May 10, 2016 10:27 pm

ruud wrote:If hypothetically instead of the Apple stock, you had $11,200 sitting in that account as cash, would you buy Apple stock with it? If so, hold on to it. If you wouldn't use the $11k to buy Apple stock, sell it and buy what you would've bought with the $11k.
That covers the "buy" and "sell" recommendations; what about the "hold" recommendation?

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