Best way to sell off invididual stock investment portfolio?

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FIRE_seeker
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Best way to sell off invididual stock investment portfolio?

Post by FIRE_seeker » Thu Oct 31, 2019 5:46 pm

Hi All,

When I first got into investing, I was heavily into the Dividend Growth Investing world, and do not regret it as it got me to consistently save each and every paycheck/month. I was subscribed to a few very helpful newsletters, websites, that gave recommendations best on value, future dividend, safety, and other helpful metrics. The idea was to eventually just live off the yield, but once I read a few more books and came to Bogleheads, I've learned to love the simplicity of a 3-fund portfolio, or at the very least index investing. I feel that I've become a bit too emotionally attached and pulled or pushed into companies based on my personal perceptions, and really don't have the interest or time currently to keep track of how each company is doing. I still do like the fundamentals of a dividend growth company (typically a MOAT they've created, defensive, long lasting enduring companies, etc.) but not a fan of keeping track of each of them.

I haven't bought an individual stock since 2016/2017, so all of the stocks are long term capital gains at this point. Also, all of these are held in a taxable brokerage account. I believe the total capital gains are ~$45,000, and at my earnings level, the LTCG is 15%.

My current strategy is total stock index, total bond index, and cash/CDs. I'm currently at a 50/50 split (including these equities).

Here's the current portfolio (25 total stocks):

https://i.ibb.co/fMYPYkQ/Capturediv.png

**Happy to provide in any other format if unable to read/review clearly, just let me know. I have has an exported excel/.csv file. Also keep in mind all of these investments started out around the same purchase amounts, but some have gained more than others. Also a few have re-buys included over the years.

Here's my questions, sorry if I'm asking too many, but I know you are all so helpful.

1. What's the best of selling all of these to be the most tax efficient? It seems it would be an immediate $6,750 tax hit come early next year for 2019 taxes.

2. There looks to be about -$6,222 in losses, which means I can sell $6,222 with zero tax liability?

3. Is it ever recommended to split tax liability? For example, selling half now for a tax hit of $3,375 next year, and then $3,375 the following year. I'd essentially sell half now, and the rest on 1/1/20?

4. To keep my simplicity, I was intending to just buy VTI/VTSAX with the proceeds for the sale, does that impact anything on the tax side if I'm instantly deploying the funds to a new investment?

5. Since it's not in Vanguard, is it silly to pay the small amount of trade commission ($7-10) to buy a Vanguard fund, instead of worrying about closing the account and transferring the funds?

6. Since I do like the idea of dividend growth companies and their fundamentals, as well as the defensive brands they represent, would it be a bad idea to move the fund proceeds into SCHD - https://www.schwabfunds.com/public/csim ... ymbol=SCHD? I've linked the fund, it's a .06 expense fund that tracks the Dow Jones US Dividend 100 Index. Basically the same dividend style funds without the complication of individual holdings. I'd still do VTI/VTSAX as I do currently for all future additions. Is this a good idea or over complicating?

7. Random final question, is there anyway in any of the online brokerages like Schwab, to see how my portfolio has compared to the S&P 500 or VTI over the same time span, considering gains + dividends? While there was a $45K increase, I'd like to know that I was hopefully somewhere in line with holding a solid index, and not wasting a ton of opportunity cost.

Thanks again for making this far, and any helpful insight I receive. I love this community. <3

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Tyler Aspect
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Re: Best way to sell off invididual stock investment portfolio?

Post by Tyler Aspect » Thu Oct 31, 2019 10:03 pm

Welcome to Bogleheads.

It seems that if you sell all your stocks with losses this year in combination with ticker DE and VFC, then you would have capital gains of $700 in this year.

Then you can sell all your individual stocks next year, and pay the additional taxes using 4 estimated tax payments.

Recently a number of stock brokers have stopped charging for stock and ETF transactions. Check if your broker have also stopped charging.

If you want to buy VTI then you might as well open a taxable account at Vanguard; you will also have access to their higher yielding money market funds.

Dividend oriented stock funds have higher amount of taxes accessed each year, so they would not be as appealing as VTI.

Hope that helped.
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1789
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Re: Best way to sell off invididual stock investment portfolio?

Post by 1789 » Thu Oct 31, 2019 10:36 pm

I would sell all of them tomorrow and put the money in VTI/VTSAX . I don't think holding dividend stocks are good strategy compared to holding VTSAX/VTI. Simplicity is powerful.
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HomeStretch
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Re: Best way to sell off invididual stock investment portfolio?

Post by HomeStretch » Thu Oct 31, 2019 10:40 pm

If you haven’t already, turn off reinvestment of dividends and capital gain distributions so you don’t buy more of the individual stocks.

If your capital gains rate is 15% for both 2019 and 2020, there no difference in the tax you will owe whether you sell all now or split the sale between 2019 and 2020. Consider selling all and reinvesting in TSM now.

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Elric
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Re: Best way to sell off invididual stock investment portfolio?

Post by Elric » Thu Oct 31, 2019 10:44 pm

FIRE_seeker wrote:
Thu Oct 31, 2019 5:46 pm
7. Random final question, is there anyway in any of the online brokerages like Schwab, to see how my portfolio has compared to the S&P 500 or VTI over the same time span, considering gains + dividends? While there was a $45K increase, I'd like to know that I was hopefully somewhere in line with holding a solid index, and not wasting a ton of opportunity cost.
Portfolio Visualizer will do this (and much, much more). https://www.portfoliovisualizer.com/bac ... sisResults
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FIRE_seeker
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Re: Best way to sell off invididual stock investment portfolio?

Post by FIRE_seeker » Fri Nov 01, 2019 3:15 pm

Tyler Aspect wrote:
Thu Oct 31, 2019 10:03 pm
Welcome to Bogleheads.

It seems that if you sell all your stocks with losses this year in combination with ticker DE and VFC, then you would have capital gains of $700 in this year.

Then you can sell all your individual stocks next year, and pay the additional taxes using 4 estimated tax payments.

Recently a number of stock brokers have stopped charging for stock and ETF transactions. Check if your broker have also stopped charging.

If you want to buy VTI then you might as well open a taxable account at Vanguard; you will also have access to their higher yielding money market funds.

Dividend oriented stock funds have higher amount of taxes accessed each year, so they would not be as appealing as VTI.

Hope that helped.
Thanks for the warm welcome! Long time lurker!

Appreciate the outside of the box strategy for off loading the stocks, I will figure out if I will do that, or simply rip the bandaid off and do it all at once.

I think the one I use recently advertised zero fee commission, so maybe this will apply for some of the Vanguard funds.

This may be an anomaly for the moment, but when looking on Google Finance at the tickers, VTI actually has a higher dividend than the fund SCHD (dividend index fund). How is that possible? VTI is showing at 2.22% div yield, while SCHD is at 2.09%?

Also kinda glad I didn't make any moves, the portfolio is up another 1% today. :)

FoolMeOnce
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Re: Best way to sell off invididual stock investment portfolio?

Post by FoolMeOnce » Fri Nov 01, 2019 3:47 pm

FIRE_seeker wrote:
Fri Nov 01, 2019 3:15 pm
Also kinda glad I didn't make any moves, the portfolio is up another 1% today. :)
VTI is also up 1% today, so it would be a wash.

Which brings up another point. If you plan to sell at Schwab, transfer cash to vanguard, and then buy at vanguard, you will be out of the bathroom for a few days. You don't want to miss one of those 1%-gain days.

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Watty
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Re: Best way to sell off invididual stock investment portfolio?

Post by Watty » Fri Nov 01, 2019 4:23 pm

FIRE_seeker wrote:
Thu Oct 31, 2019 5:46 pm
Also, all of these are held in a taxable brokerage account. I believe the total capital gains are ~$45,000, and at my earnings level, the LTCG is 15%.
It would be good to do a dummy tax return to confirm the tax impact since there can be unexpected tax consequences like tax credit phase outs and Medicare IRMAA surcharges.

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Hector
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Re: Best way to sell off invididual stock investment portfolio?

Post by Hector » Fri Nov 01, 2019 5:31 pm

I would,
Leave stocks with gain the way they are.
Sell all looses and enjoy reducing my taxable income up-to $3000/year.
If/when I have carryover losses big enough to reduce my taxable income for few years, then I would think about selling stocks with gain.
Open brokerage account somewhere (Charles Schwab, TD Ameritrade, Fidelity, E-trade...) where there is no trading commission for stock and ETF trading.
You don't know if your individual stock portfolio is going to beat index fund or not. But you know that you will pay taxes now if you sell winners.

ExitStageLeft
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Re: Best way to sell off invididual stock investment portfolio?

Post by ExitStageLeft » Fri Nov 01, 2019 6:01 pm

In your image of the gains and losses, you show gain as Value - Cost. Is that the same as unrealized gain as reported by Schwab? I just want to make sure you're not overlooking the fact the basis may be much higher due to distribution of dividends.

Cosmic Pony
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Re: Best way to sell off invididual stock investment portfolio?

Post by Cosmic Pony » Fri Nov 01, 2019 6:44 pm

I'm in the same boat. I own about 30 individual stocks and bought for dividend income prior to running some portfolio models against the three fund portfolio earlier this year. Mine are in both retirement and taxable accounts. I've decided to 1) Set an overall asset allocation and move toward this over the next few years. This involved selling stocks and buying quite a large amount of bond ETFs in tax sheltered accounts. I did this all at once because I had a rollover of a 401K into and IRA (lost my job) that allowed me to start clean with bond purchases. 2) Get rid of the losers in taxable accounts and invest those funds in VTI. 3) Carefully analyze what is left and decide which might be lower maintenance keepers versus stocks that require more research day to day and dump the higher maintenance, invest that money in VTI. 3) Look to continued selling over the coming few years getting rid of individual stocks based on how safe or risky they may be. Yes, I know that market conditions change quickly and risk it relative. Also know I will still need to follow the conference calls and such but hopefully the work will decrease over time. I'm sure others will second guess this approach- say to just do it all at once - but I've decided I'm just not comfortable with that and some of my stocks are yielding significant dividend income versus cost basis.

inbox788
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Re: Best way to sell off invididual stock investment portfolio?

Post by inbox788 » Fri Nov 01, 2019 8:57 pm

Hector wrote:
Fri Nov 01, 2019 5:31 pm
I would,
Leave stocks with gain the way they are.
Sell all looses and enjoy reducing my taxable income up-to $3000/year.
If/when I have carryover losses big enough to reduce my taxable income for few years, then I would think about selling stocks with gain.
Open brokerage account somewhere (Charles Schwab, TD Ameritrade, Fidelity, E-trade...) where there is no trading commission for stock and ETF trading.
You don't know if your individual stock portfolio is going to beat index fund or not. But you know that you will pay taxes now if you sell winners.
+1

OP, what Is your ordinary income and short term capital gains tax rate? Any holdings other than these? Taxable?

Topic Author
FIRE_seeker
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Re: Best way to sell off invididual stock investment portfolio?

Post by FIRE_seeker » Thu Nov 07, 2019 12:25 pm

inbox788 wrote:
Fri Nov 01, 2019 8:57 pm
Hector wrote:
Fri Nov 01, 2019 5:31 pm
I would,
Leave stocks with gain the way they are.
Sell all looses and enjoy reducing my taxable income up-to $3000/year.
If/when I have carryover losses big enough to reduce my taxable income for few years, then I would think about selling stocks with gain.
Open brokerage account somewhere (Charles Schwab, TD Ameritrade, Fidelity, E-trade...) where there is no trading commission for stock and ETF trading.
You don't know if your individual stock portfolio is going to beat index fund or not. But you know that you will pay taxes now if you sell winners.
+1

OP, what Is your ordinary income and short term capital gains tax rate? Any holdings other than these? Taxable?
It looks like I'd be in the 35% bracket based on income, although all of these stocks are from 2016-2017 or earlier so long term capital gains I believe. I have bonds in my 401K, stocks in the Roth, and more stocks in taxable (but VTI, VXUS).

I'd like to sell all of these and put them into SCHD (the same concept for strong div stocks), which seems nearly identical to VTI over the years, or just add it to VTI.

I was reading somewhere there might be an additional 3.8% investor fee applied too?

HomeStretch
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Re: Best way to sell off invididual stock investment portfolio?

Post by HomeStretch » Thu Nov 07, 2019 12:34 pm

FIRE_seeker wrote:
Thu Nov 07, 2019 12:25 pm
I was reading somewhere there might be an additional 3.8% investor fee applied too?
It’s called the Net Investment Income Tax:
https://www.irs.gov/newsroom/questions- ... income-tax

inbox788
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Re: Best way to sell off invididual stock investment portfolio?

Post by inbox788 » Thu Nov 07, 2019 1:23 pm

FIRE_seeker wrote:
Thu Nov 07, 2019 12:25 pm
It looks like I'd be in the 35% bracket based on income, although all of these stocks are from 2016-2017 or earlier so long term capital gains I believe. I have bonds in my 401K, stocks in the Roth, and more stocks in taxable (but VTI, VXUS).

I'd like to sell all of these and put them into SCHD (the same concept for strong div stocks), which seems nearly identical to VTI over the years, or just add it to VTI.

I was reading somewhere there might be an additional 3.8% investor fee applied too?
Simple math, but SP500 was at 2000 in 2016 and is now 3000, so your $176k-45k=131k would have grown by 65.5k to 196.5k if you bought it all on a day when SP500 was 2000 and sold it today when it is 3000. Now you bought it along the way, so you have to take into account the specific amount bought on the specific date to make an equivalent comparison. And you have to take into account dividends and taxation when making comparisons. https://www.investopedia.com/ask/answer ... idends.asp

In 2017, SP500 went from 2250 to 2750, so if you bought $131k at the end of 2017 it would be worth 9% or $11.8k more vs. at the beginning of 2017 it would be 27% or $35.37k, or if you drew a straight line in 2017, half way at 18% or $23.6k, a very gross estimate. So depending on when you invested, you could make a similar gross estimate, but getting a more precise comparison is very tedious, left as an exercise left to reader.

At high tax rates, many folks are looking to lower tax-inefficient dividends, but these are all relatively low.
VOO Div yield 1.39%
VTI Div yield 2.20%
SCHD Div yield 2.06%

You might also search some threads on Modigliani-Miller (like this one viewtopic.php?t=219681 ) and see how it compares to your investment style and whether it changes your thinking. "The more I learn, the less I know."

Anyway, there's not much tax consequence to getting rid of the losers and low gains or small holdings, so you could easily have less than 10 stocks to track. And down the road if you're fortunate to have bigger gains, one of the easiest and effective ways to get rid of the few remaining holdings is to donate them.

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