Advice for bad advice

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goonkidd
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Advice for bad advice

Post by goonkidd » Thu May 31, 2018 2:08 am

Hello,

I took some bad advice 5 years ago and opened a TD Ameritrade account and thankfully only invested $2,000 in about 22 individual stocks.......I know stupid...stupid. My portfolio luckily has gained some $300 in those 5 years and after being on this forum, thinking of closing this account and instead investing in the three Vanguard fund strategy.

Can BH give me sound advice on how I should proceed?

Thanks.

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celia
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Re: Advice for bad advice

Post by celia » Thu May 31, 2018 2:13 am

Did you invest $2,000 in total or $2,000 in each of 22 companies (for a $44,000 investment)?
What kind of account was it (taxable, tax-deferred, Roth)?
Do you have any other financial assets?

goonkidd
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Re: Advice for bad advice

Post by goonkidd » Thu May 31, 2018 2:44 am

I only invested $2,000 total in a taxable account. I have a 401k, Roth, and Traditional IRA as well. I have $600k in emergency fund, which I'd like to invest a portion of in Vanguard funds. My 401k and Roth's are fully funded.

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LiveSimple
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Re: Advice for bad advice

Post by LiveSimple » Thu May 31, 2018 2:54 am

A couple of option, I do see
  • Sell all stocks, close the account and reinvest in mutual funds
    Transfer in kind, close the account
Last edited by LiveSimple on Thu May 31, 2018 2:56 am, edited 1 time in total.

stan1
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Re: Advice for bad advice

Post by stan1 » Thu May 31, 2018 2:55 am

OK, the easy part. Just go in and sell everything in the $2300 taxable account. That's less than 1% of your $600K emergency fund. Just clear it out and move on. TD Ameritrade will calculate any capital gains tax owed and issue you a 1099 next February. Just enter what they give you on your 2018 tax return next year (or give the 1099 to your accountant if you use one). If these are long term gains the amount of tax owed may be well under $50.

Now ... why do you have a $600K emergency fund? That matters much more but we need to look at your entire portfolio including 401Ks, IRAs plus debt and home ownership plans to help you with that.

goonkidd
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Re: Advice for bad advice

Post by goonkidd » Thu May 31, 2018 3:22 am

Thank you again, hopefully I'm on the path to better financial guidance thanks to this great forum. Ok, to get back to my 600k in emer fund is really due to my own lack of security. I have a stable job, two investment properties that are rented but cover about 70% of my mortgage, so am happy to keep them and write off the tax deductions. Based on what I have read here, I'm thinking of allocating 10% of my emer fund to the three Vanguard fund strategy.

RickBoglehead
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Re: Advice for bad advice

Post by RickBoglehead » Thu May 31, 2018 5:33 am

Can't imagine having $600,000 in an emergency fund unless my monthly expenses were $25,000 (24 months).

Grt2bOutdoors
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Re: Advice for bad advice

Post by Grt2bOutdoors » Thu May 31, 2018 6:18 am

RickBoglehead wrote:
Thu May 31, 2018 5:33 am
Can't imagine having $600,000 in an emergency fund unless my monthly expenses were $25,000 (24 months).
You can’t imagine it because you are not in OP’s shoes, but their are situations where having such a large pot of safety money makes perfect sense.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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whodidntante
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Re: Advice for bad advice

Post by whodidntante » Thu May 31, 2018 7:01 am

What is that 600k for? Is it just uninvested cash, or do you realistically need 600k for an emergency? Can you stand a real (after inflation) loss of 2%, 10%, 25%, 50%, or more with that money? I know you don't want any loss; none of us do. But you have to take risk if you want growth.

JoeRetire
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Re: Advice for bad advice

Post by JoeRetire » Thu May 31, 2018 7:13 am

Grt2bOutdoors wrote:
Thu May 31, 2018 6:18 am
RickBoglehead wrote:
Thu May 31, 2018 5:33 am
Can't imagine having $600,000 in an emergency fund unless my monthly expenses were $25,000 (24 months).
You can’t imagine it because you are not in OP’s shoes, but their are situations where having such a large pot of safety money makes perfect sense.
I'd love to hear from the OP the reasons why $600,000 emergency fund makes sense for him/her. As far as I can tell "due to my own lack of security" is the reason. Maybe that makes sense due to an exceedingly low risk tolerance.

MathIsMyWayr
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Re: Advice for bad advice

Post by MathIsMyWayr » Thu May 31, 2018 7:19 am

We are looking at $2,000 out of $600,000. It is a tiny fraction, around 0.3%, just a noise. You may consider it a part of EF and start over. No need to fret over small things. Any way, it worked out better than savings account :? .

BuckyBadger
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Re: Advice for bad advice

Post by BuckyBadger » Thu May 31, 2018 8:33 am

My concern is what the rest of the portfolio (IRA, 401k) is invested in. Hopefully not also individual stocks?

A $2300 account is barely noise here. Just cash it out and do whatever you want with the $2300...

Lafder
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Re: Advice for bad advice

Post by Lafder » Thu May 31, 2018 8:40 am

Take the time to post all of your holdings in this format so you can make a comprehensive plan including how much of your cash to invest or hold as an emergency fund. We can help be sure your retirement accounts are optimized and fit in with the rest of your plan.

What is your desired asset allocation?

As others have said, this 2300$ is a small % of the total. You are losing much more if the rest of your holdings are at high expense or not as you want them to be.

viewtopic.php?f=1&t=6212

lafder

Easy Rhino
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Re: Advice for bad advice

Post by Easy Rhino » Thu May 31, 2018 1:02 pm

The dollar amount really doesn't matter in the scope of your overall portfolio.

You can sell it all if you want to simplify.

You can keep it if you want to see stock holdings fluctuate up and down for fun.

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celia
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Re: Advice for bad advice

Post by celia » Thu May 31, 2018 11:21 pm

goonkidd wrote:
Thu May 31, 2018 2:44 am
I only invested $2,000 total in a taxable account. I have a 401k, Roth, and Traditional IRA as well. I have $600k in emergency fund, which I'd like to invest a portion of in Vanguard funds. My 401k and Roth's are fully funded.
If you have only $2,000 total for 22 stocks, that means the average value for each stock is under $100. If that is correct, you should first find out what the commission is for buying or selling the stocks. That could be anywhere from free to $50 a trade. (You will have to pay this fee 22 times.) There are a few places that will give you unlimited free trades for 30 days on new accounts, but if you will only save $100 by moving to the "free trade" brokerage, that may not be worth the time to move everything. Other places (like where you hold your other accounts) will offer lower commissions if your total balance is high.

If you were to move to another brokerage, you will need records showing exactly how much you paid for each holding (cost - commissions for buying). One nice thing about selling at the same brokerage you bought at, is that they will have these records and put it on the tax form for your capital gains/losses for when you do your 2018 tax return.

There's nothing wrong with TD Ameritrade, per se, but you need to know what you are buying and why. Mutual funds are better for beginners since each mutual fund share represents ownership in about 100 companies, so you are more diversified that when you hold individual companies. Then, if one company goes bust, it is a very small part of your portfolio.

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