To sell or not to sell

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GoldenGoose
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To sell or not to sell

Post by GoldenGoose » Thu Mar 08, 2018 12:15 pm

That is the question. I have in my holding a few individual stock winners in my personal account that I have not sold yet. These are about 50% of my total investment assets (not counting house). Knowing how you guys preach about "diversification", I wonder which course of action I should take with the full understanding of the risk/reward concept and the fact that I don't need the cash at this point. Note: these are solid and stable companies that I don't feel like they will go kaput, not in the 5 years span.

1. Do nothing, let them ride.
2. Sell them and buy index funds
3. Sell them and hold on to cash, waiting for the opportunity to get back in again.

onourway
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Re: To sell or not to sell

Post by onourway » Thu Mar 08, 2018 12:17 pm

I would consider what you would do if you had that amount in cash today. Let that be your guide.

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BolderBoy
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Re: To sell or not to sell

Post by BolderBoy » Thu Mar 08, 2018 12:21 pm

GoldenGoose wrote:
Thu Mar 08, 2018 12:15 pm
Note: these are solid and stable companies that I don't feel like they will go kaput, not in the 5 years span.
So were Kodak and GE.

With an eye on limiting your capital gains tax exposure, it is time to diversify...
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

WhiteMaxima
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Re: To sell or not to sell

Post by WhiteMaxima » Thu Mar 08, 2018 12:31 pm

maybe sell portion of them and buy into index. single stock is kind of risky.

JimSmiley1850
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Re: To sell or not to sell

Post by JimSmiley1850 » Thu Mar 08, 2018 12:55 pm

Don’t sell .. donate! A thought to consider, maybe you already have planned donations to church or other charities ... donating appreciated stock is generally a win win. Even consider a Donor Fund easy to set up (at least my experience with Fidelity) that allows you to donate over time but take the charitable deduction this year. Perhaps something to consider.

JW-Retired
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Re: To sell or not to sell

Post by JW-Retired » Thu Mar 08, 2018 1:01 pm

2. Sell them and buy index funds

But your timing of this ought to consider the cap gain tax & AMT & other tax you might need to pay. We don't have any info about your fed & state cap gain tax rates but, depending on your income, your federal tax could be anywhere from 0 clear up to 20-something%, plus up to another 13% (if you live in CA). :shock:

If only 15% or less I wouldn't hesitate to sell much of these holdings ASAP so you don't have so much single stock risk.
JW
Retired at Last

azurekep
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Re: To sell or not to sell

Post by azurekep » Thu Mar 08, 2018 1:13 pm

GoldenGoose wrote:
Thu Mar 08, 2018 12:15 pm
That is the question. I have in my holding a few individual stock winners in my personal account that I have not sold yet. These are about 50% of my total investment assets (not counting house). Knowing how you guys preach about "diversification", I wonder which course of action I should take with the full understanding of the risk/reward concept and the fact that I don't need the cash at this point. Note: these are solid and stable companies that I don't feel like they will go kaput, not in the 5 years span.
If the stocks are holding you back from a truly diversified portfolio, you should sell them and buy some index funds. The timing is up to you, BUT:

It's a handy trick to pretend you're managing someone else's money, not your own. If you were a (Boglehead-minded) financial manager managing other people's money (OPM), you would simply rip the bandaid off, do whatever selling and buying needs to be done and would end up with the appropriate allocations.

IOW, pretending you're managing OPM takes out the emotion and makes you dispassionate as you're restructuring your portfolio.

carolinaman
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Re: To sell or not to sell

Post by carolinaman » Thu Mar 08, 2018 2:12 pm

onourway wrote:
Thu Mar 08, 2018 12:17 pm
I would consider what you would do if you had that amount in cash today. Let that be your guide.
Your first consideration should be the tax impact of selling. Selling all at once could trigger a big tax bill.

Bogleheads prefer a low cost, well diversified investment approach, typically low cost index funds. If you agree with that approach, I would recommend developing a strategy to move towards that sort of AA, but in a manner that minimizes your tax costs. This might mean taking a few years to complete the transition.

NotWhoYouThink
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Re: To sell or not to sell

Post by NotWhoYouThink » Thu Mar 08, 2018 2:17 pm

Since these are already such a large part of your portfolio, make sure you have dividend reinvestment turned off. Invest the dividends in index funds.

Whether to sell or not sell depends on tax issues, so you haven't provided enough information to get good advice.

If you do sell, reinvest in index funds immediately. Do not leave the money in cash waiting to get back in. Once you hold the index funds, it's ok to have dividend reinvestment on those.

rai
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Re: To sell or not to sell

Post by rai » Thu Mar 08, 2018 2:31 pm

It’s likely you are talking about Apple stock among others, it’s the largest market cap stock and has gone up 10x in the past x number of years.

Selling a stock that you’re up hundreds of percent is almost all capital gains, it’s hard for me (example) 30% tax on sale of stock, means a guaranteed loss of money.

I know people will say GE or Kodak examples but there are other examples like Microsoft that have not gone away, and Apple makes profits in one year more than most companies will make in 10 years.

It’s hard to compare Apple with Kodak, not sure if Kodak made as much profit in 50 years as Apple makes in one year. GE is a messy conglomerate with (likely) poorly run by the former CEO, massive debt and pension obligations whereas Apple has very clean books and a quarter trillion in dollars in cash.
Last edited by rai on Thu Mar 08, 2018 2:41 pm, edited 1 time in total.
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rai
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Re: To sell or not to sell

Post by rai » Thu Mar 08, 2018 2:31 pm

Double post

If I sold all my ‘winners’ at once I’d have to pay $xxx,xxx in taxes on capital gains, that’s not happening with my stock position so I’m trying to sell a few hundred shares a year.

Probably the best to do is sell some every year until you are comfortable with the percentages.

Example if you own 1000 shares of Apple you may try to sell 50 shares every few months until you hold 500 shares or 100 shares or no shares whatsoever you decide.
Last edited by rai on Thu Mar 08, 2018 2:40 pm, edited 1 time in total.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

gotester2000
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Re: To sell or not to sell

Post by gotester2000 » Thu Mar 08, 2018 2:40 pm

I will do nothing and let them ride till I feel they are fundamentally strong - analyze quarterly.

bloom2708
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Re: To sell or not to sell

Post by bloom2708 » Thu Mar 08, 2018 2:45 pm

If you let the shares ride and they continue to do well, then your tax problem is worse.

If you let the shares ride and they tank or 1 or 2 do, then your tax problem is better but your value dropped. Could have just paid some tax. :twisted:

I would sell 50% in March 2018 and 50% in Janurary 2019. Pay the tax. Paying "success" tax isn't that bad when you made a pile of money. The whole pile isn't yours.
Last edited by bloom2708 on Thu Mar 08, 2018 3:10 pm, edited 1 time in total.
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onourway
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Re: To sell or not to sell

Post by onourway » Thu Mar 08, 2018 3:08 pm

carolinaman wrote:
Thu Mar 08, 2018 2:12 pm
onourway wrote:
Thu Mar 08, 2018 12:17 pm
I would consider what you would do if you had that amount in cash today. Let that be your guide.
Your first consideration should be the tax impact of selling. Selling all at once could trigger a big tax bill.

Bogleheads prefer a low cost, well diversified investment approach, typically low cost index funds. If you agree with that approach, I would recommend developing a strategy to move towards that sort of AA, but in a manner that minimizes your tax costs. This might mean taking a few years to complete the transition.
In the meantime the portfolio is largely controlled by the performance of a few individual stocks - the complete antithesis of the diversity we strive for. Taxes may be painful, but they mean you've made a lot of money. What would be worse - selling now and paying taxes because you are diversifying your gains, or waiting because of fear of taxes - in which case one of two things happens - the stocks continue to do well and your tax problem (and portfolio imbalance) continues to get worse, or they fall and you sell for less money (and a bit less) in tax?

Chris K Jones
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Re: To sell or not to sell

Post by Chris K Jones » Thu Mar 08, 2018 3:25 pm

I would sell them. I would do it in a way that minimizes taxes. They are too high percentage of your portfolio. If it were 10%, I 'd hold onto them, but you say they are 50%. The only exception being if you had a very large portfolio, one where loss of all these individual stocks would not affect your goals. Best wishes.

GoldenGoose
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Re: To sell or not to sell

Post by GoldenGoose » Thu Mar 08, 2018 3:29 pm

BolderBoy wrote:
Thu Mar 08, 2018 12:21 pm
GoldenGoose wrote:
Thu Mar 08, 2018 12:15 pm
Note: these are solid and stable companies that I don't feel like they will go kaput, not in the 5 years span.
So were Kodak and GE.

With an eye on limiting your capital gains tax exposure, it is time to diversify...
Replace "Kodak and GE" with "Amazon and Google".

You don't truly know for sure 100% which way they will turn out but I have a good feeling these won't be those 2 you mentioned.

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220volt
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Re: To sell or not to sell

Post by 220volt » Thu Mar 08, 2018 3:30 pm

Just put a trailing stop loss and let the market stop you out. If it doesn't, even better, more profit! let them ride until it does.
"If I had only followed the advice of financial analysts in 2008, I'd have a million dollars today, provided I started with a hundred million dollars" - Jon Stewart

GoldenGoose
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Re: To sell or not to sell

Post by GoldenGoose » Thu Mar 08, 2018 3:31 pm

WhiteMaxima wrote:
Thu Mar 08, 2018 12:31 pm
maybe sell portion of them and buy into index. single stock is kind of risky.
Agree, but with the risk comes the reward. We all know that. And right now their paper return is > 25%. Which indexes offer that kind of return? I would jump in with both feet.

GoldenGoose
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Re: To sell or not to sell

Post by GoldenGoose » Thu Mar 08, 2018 3:32 pm

JimSmiley1850 wrote:
Thu Mar 08, 2018 12:55 pm
Don’t sell .. donate! A thought to consider, maybe you already have planned donations to church or other charities ... donating appreciated stock is generally a win win. Even consider a Donor Fund easy to set up (at least my experience with Fidelity) that allows you to donate over time but take the charitable deduction this year. Perhaps something to consider.
I don't need the cash now does not mean I don't need the cash. :) I'm not that well off to donate thousands of dollars just to get some tax cuts, but thanks for the suggestion.

GoldenGoose
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Re: To sell or not to sell

Post by GoldenGoose » Thu Mar 08, 2018 3:36 pm

JW-Retired wrote:
Thu Mar 08, 2018 1:01 pm
2. Sell them and buy index funds

But your timing of this ought to consider the cap gain tax & AMT & other tax you might need to pay. We don't have any info about your fed & state cap gain tax rates but, depending on your income, your federal tax could be anywhere from 0 clear up to 20-something%, plus up to another 13% (if you live in CA). :shock:

If only 15% or less I wouldn't hesitate to sell much of these holdings ASAP so you don't have so much single stock risk.
JW
This is hard. The only reason I think I would sell is if I knew of an impending crash and I am preparing to hoard my cash for a chance to buy cheap. If I don't feel like there is such a crash, then why would I sell and buy index funds. Not to mention I have to pay cap gain taxes for no good reason. Decisions, decisions.

GoldenGoose
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Re: To sell or not to sell

Post by GoldenGoose » Thu Mar 08, 2018 3:40 pm

azurekep wrote:
Thu Mar 08, 2018 1:13 pm
GoldenGoose wrote:
Thu Mar 08, 2018 12:15 pm
That is the question. I have in my holding a few individual stock winners in my personal account that I have not sold yet. These are about 50% of my total investment assets (not counting house). Knowing how you guys preach about "diversification", I wonder which course of action I should take with the full understanding of the risk/reward concept and the fact that I don't need the cash at this point. Note: these are solid and stable companies that I don't feel like they will go kaput, not in the 5 years span.
If the stocks are holding you back from a truly diversified portfolio, you should sell them and buy some index funds. The timing is up to you, BUT:

It's a handy trick to pretend you're managing someone else's money, not your own. If you were a (Boglehead-minded) financial manager managing other people's money (OPM), you would simply rip the bandaid off, do whatever selling and buying needs to be done and would end up with the appropriate allocations.

IOW, pretending you're managing OPM takes out the emotion and makes you dispassionate as you're restructuring your portfolio.
I do have 50% of my investments in mutual funds so I'm diversified there. I just want to accelerate my ROI instead of playing it too safe. You can label me greed. 8-)

onourway
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Re: To sell or not to sell

Post by onourway » Thu Mar 08, 2018 3:42 pm

GoldenGoose wrote:
Thu Mar 08, 2018 3:36 pm
This is hard. The only reason I think I would sell is if I knew of an impending crash and I am preparing to hoard my cash for a chance to buy cheap. If I don't feel like there is such a crash, then why would I sell and buy index funds. Not to mention I have to pay cap gain taxes for no good reason. Decisions, decisions.
You would sell to better control the risk of your portfolio. Remember that investments are not simply about maximizing returns. They are about risk-adjusted returns. With 50% of your portfolio your risk is amplified greatly over holding that same amount in the index. Your returns may be more or less from the index. You don't know.

I'll ask again. If you had a windfall of this amount (on an after-tax basis), would you buy index funds or these stocks?

itstoomuch
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Re: To sell or not to sell

Post by itstoomuch » Thu Mar 08, 2018 3:46 pm

GoldenGoose wrote:
Thu Mar 08, 2018 12:15 pm
That is the question. I have in my holding a few individual stock winners in my personal account that I have not sold yet. These are about 50% of my total investment assets (not counting house). Knowing how you guys preach about "diversification", I wonder which course of action I should take with the full understanding of the risk/reward concept and the fact that I don't need the cash at this point. Note: these are solid and stable companies that I don't feel like they will go kaput, not in the 5 years span.

1. Do nothing, let them ride.
2. Sell them and buy index funds
3. Sell them and hold on to cash, waiting for the opportunity to get back in again.
How old are you?
How does your 401, IRA, Roths look like?
What is your debt situation?
What is your tax bracket?
Single, married, kids, housing?
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

GoldenGoose
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Re: To sell or not to sell

Post by GoldenGoose » Thu Mar 08, 2018 3:51 pm

bloom2708 wrote:
Thu Mar 08, 2018 2:45 pm
If you let the shares ride and they continue to do well, then your tax problem is worse.

If you let the shares ride and they tank or 1 or 2 do, then your tax problem is better but your value dropped. Could have just paid some tax. :twisted:

I would sell 50% in March 2018 and 50% in Janurary 2019. Pay the tax. Paying "success" tax isn't that bad when you made a pile of money. The whole pile isn't yours.
Amen. I don't mind the taxes if I make money. The more gains, the better. However, you are right. I have to take my annual income into the picture or else I'll be in a higher tax bracket. Totally forgot about this one. My bad.

GoldenGoose
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Re: To sell or not to sell

Post by GoldenGoose » Thu Mar 08, 2018 3:56 pm

onourway wrote:
Thu Mar 08, 2018 3:42 pm
GoldenGoose wrote:
Thu Mar 08, 2018 3:36 pm
This is hard. The only reason I think I would sell is if I knew of an impending crash and I am preparing to hoard my cash for a chance to buy cheap. If I don't feel like there is such a crash, then why would I sell and buy index funds. Not to mention I have to pay cap gain taxes for no good reason. Decisions, decisions.
You would sell to better control the risk of your portfolio. Remember that investments are not simply about maximizing returns. They are about risk-adjusted returns. With 50% of your portfolio your risk is amplified greatly over holding that same amount in the index. Your returns may be more or less from the index. You don't know.

I'll ask again. If you had a windfall of this amount (on an after-tax basis), would you buy index funds or these stocks?
Depends. If this amount is not all the money I have or the majority of my assets, then I would buy these stocks. The only thing that would make me pause is if the market is going to crash, in which I would kick myself for getting in too early. :)

GoldenGoose
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Re: To sell or not to sell

Post by GoldenGoose » Thu Mar 08, 2018 4:28 pm

itstoomuch wrote:
Thu Mar 08, 2018 3:46 pm
GoldenGoose wrote:
Thu Mar 08, 2018 12:15 pm
That is the question. I have in my holding a few individual stock winners in my personal account that I have not sold yet. These are about 50% of my total investment assets (not counting house). Knowing how you guys preach about "diversification", I wonder which course of action I should take with the full understanding of the risk/reward concept and the fact that I don't need the cash at this point. Note: these are solid and stable companies that I don't feel like they will go kaput, not in the 5 years span.

1. Do nothing, let them ride.
2. Sell them and buy index funds
3. Sell them and hold on to cash, waiting for the opportunity to get back in again.
How old are you?
How does your 401, IRA, Roths look like?
What is your debt situation?
What is your tax bracket?
Single, married, kids, housing?
45 yo
married with 2 kids
Estimate total asset is a bit more than $1M, $36K in mortgage, $300K of individual stocks in personal account.
Tax bracket for 2016 is 28% (haven't done 2017 yet :) )

I did not seriously invest prior to 2008, before the crash. Before then, I contributed the minimum to 401K and was just dabbling in a few stocks and being inexperienced lost money (not a lot, less than $10K over time but still a loss) so it turned me off. The 2008 piqued my interest and now I'm a bit wiser but still behind the curve. I want to play catch up so I need to be a bit more risky.

itstoomuch
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Re: To sell or not to sell

Post by itstoomuch » Thu Mar 08, 2018 5:15 pm

JMO. YMMV.
From our Only's (32) experience: Single, homeowner, can't do Roth, 28% bracket.
He is fully invested in his 401k and IRA with Vanguard Indexes. He has some Blackrock Midcap and Russell Indexes in taxables.
He has stock options with his company that now exceed his 401k value.
He has some individual stocks (FANG type) which have appreciated nicely and exceed VTI total yield growth. He said that he has 10 shares of AMZN that he acquired last fall @1000/sh. His taxable Individual stocks' value is approaching the value of his 401k value.
I don't think he should sell his individual stocks.
He's trying to attract a Bird (urban dictionary's primary definition).
YMMV

Our son will be in a high tax bracket in retirement. He will inherit our properties.
It's not a question of being "a bit more risky" in your taxables but a question of prudent tax and asset planning :idea: :mrgreen: :dollar
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

onourway
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Re: To sell or not to sell

Post by onourway » Thu Mar 08, 2018 5:29 pm

GoldenGoose wrote:
Thu Mar 08, 2018 3:56 pm
onourway wrote:
Thu Mar 08, 2018 3:42 pm
GoldenGoose wrote:
Thu Mar 08, 2018 3:36 pm
This is hard. The only reason I think I would sell is if I knew of an impending crash and I am preparing to hoard my cash for a chance to buy cheap. If I don't feel like there is such a crash, then why would I sell and buy index funds. Not to mention I have to pay cap gain taxes for no good reason. Decisions, decisions.
You would sell to better control the risk of your portfolio. Remember that investments are not simply about maximizing returns. They are about risk-adjusted returns. With 50% of your portfolio your risk is amplified greatly over holding that same amount in the index. Your returns may be more or less from the index. You don't know.

I'll ask again. If you had a windfall of this amount (on an after-tax basis), would you buy index funds or these stocks?
Depends. If this amount is not all the money I have or the majority of my assets, then I would buy these stocks. The only thing that would make me pause is if the market is going to crash, in which I would kick myself for getting in too early. :)
I'm not sure how that answers the question? You can calculate the after-tax value of selling these, and compare the asset allocation you have now vs. what you'd have if you converted these holdings to cash, and bought something else. You know exactly how much of the portfolio this makes up - you say it's about half of your holdings. So if today you had 50% of your holdings in cash and 50% in properly diversified funds, what would you spend that cash on?

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BolderBoy
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Re: To sell or not to sell

Post by BolderBoy » Thu Mar 08, 2018 5:55 pm

GoldenGoose wrote:
Thu Mar 08, 2018 3:29 pm
BolderBoy wrote:
Thu Mar 08, 2018 12:21 pm
GoldenGoose wrote:
Thu Mar 08, 2018 12:15 pm
Note: these are solid and stable companies that I don't feel like they will go kaput, not in the 5 years span.
So were Kodak and GE.

With an eye on limiting your capital gains tax exposure, it is time to diversify...
Replace "Kodak and GE" with "Amazon and Google".

You don't truly know for sure 100% which way they will turn out but I have a good feeling these won't be those 2 you mentioned.
Context is everything. If you look at Kodak and GE in their heyday, they could do no wrong. There are plenty of other similar examples.

If you are absolutely sure you can pick only the winners, then you'd be a fool to follow the BH suggestions and diversification will only hold you back. Go for it! In 2001 or so, Money Magazine did one of their monthly, "One Person's Finances" columns and spotlighted a [Yugoslavian?] immigrant who, in 1998/1999, took his entire life savings and bought one stock - Qualcomm. Between 1998-2000 Qualcomm went up >2500%! The spotlighted individual rode the $17 million wave back down to approx $12 million and sold it all.

Brilliant, right? Not so much. Gambling...
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

GoldenGoose
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Re: To sell or not to sell

Post by GoldenGoose » Thu Mar 08, 2018 6:05 pm

onourway wrote:
Thu Mar 08, 2018 5:29 pm
I'm not sure how that answers the question? You can calculate the after-tax value of selling these, and compare the asset allocation you have now vs. what you'd have if you converted these holdings to cash, and bought something else. You know exactly how much of the portfolio this makes up - you say it's about half of your holdings. So if today you had 50% of your holdings in cash and 50% in properly diversified funds, what would you spend that cash on?
If I have 50% of my holding in cash, I would go to Vegas and ... never mind. Just kidding. :)

That's a tough question you asked. My first half of me says "don't commit, hold the cash and wait. This bull market can't last that long". But then again my second half says "there isn't anything visible on the horizon that would cause a market crash so let's take risk". My third and significant half says "Buy me a new fancy expensive BMW". I guess it would have been easier if I wasn't holding these winners but instead holding some middling, under performed stocks. That would make the decision easier for me to get out and diversify.

mchampse
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Re: To sell or not to sell

Post by mchampse » Thu Mar 08, 2018 6:51 pm

Do you intend to leave these stocks for your kids when you die? If so, hold on by all means. If not, you will have to pay capital gains taxes at some point anywhichway. There’s some compounding, but it’s close to a wash. The reduced risk more than makes up for any extra gain.

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arcticpineapplecorp.
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Re: To sell or not to sell

Post by arcticpineapplecorp. » Thu Mar 08, 2018 7:42 pm

another way to think about is the following (usually applied to how to make decisions about holding stocks that have done poorly, not well...but I think the same mentality can apply):

If you did not own any of the stocks in the amounts you currently own them, would you go out and buy the very stocks in the same amounts right now?

If the answer is yes, then you should not only keep them, you should be buying more!
If the answer is no, then you should sell because why would you hold something you wouldn't want to be buying?

that being said, if you plan to sell, please wisely consider the tax implications of creating capital gains and manage your taxes.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

mortfree
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Re: To sell or not to sell

Post by mortfree » Thu Mar 08, 2018 8:24 pm

Never met a boglehead who doesn’t hesitate to automatically say to sell ANY individual stock. Winner or loser, it doesn’t matter.

Stand there, don’t do anything has been working for me.

Sirius XM since 2004
Apple since 2007
Google since 2008

Eventually my “luck” will end. Or not.

Then I have to pay taxes.

So much for investing to make money. Struggling to figure out why some people invest.

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randomizer
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Re: To sell or not to sell

Post by randomizer » Thu Mar 08, 2018 8:30 pm

Option "2" is so clearly better than the others.
87.5:12.5, EM tilt — HODL the course!

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Watty
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Re: To sell or not to sell

Post by Watty » Thu Mar 08, 2018 9:39 pm

To sell or not to sell
The question is really "when" you should sell the stocks not "if" you should sell.

That could be tomorrow, a few years from now, a few decades from now, or after you die when whoever inherits it sells it.

When it is eventually sold if the taxes are due will be the same as you would pay today then you have not really saved any taxes you have only deferred paying the taxes.

If you don't have a realistic expectation of being in a lower tax bracket when you eventually sell the stocks I would not let the tax considerations prevent you from selling the stocks now.

itstoomuch
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Location: midValley OR

Re: To sell or not to sell

Post by itstoomuch » Thu Mar 08, 2018 9:43 pm

JMO, YMMV
Our son (32) has a different perspective. He's a buy and hold. #1 Scenario.
We (68/71) have another perspective. We are currently, a sell and go to cash for another opportunity. #3 Scenario.

OP, you could query each responder on their own financial position and which would help you delve into their personal reasons :oops: .
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

venkman
Posts: 718
Joined: Tue Mar 14, 2017 10:33 pm

Re: To sell or not to sell

Post by venkman » Thu Mar 08, 2018 11:01 pm

GoldenGoose wrote:
Thu Mar 08, 2018 12:15 pm
That is the question. I have in my holding a few individual stock winners in my personal account that I have not sold yet. These are about 50% of my total investment assets (not counting house). Knowing how you guys preach about "diversification", I wonder which course of action I should take with the full understanding of the risk/reward concept and the fact that I don't need the cash at this point. Note: these are solid and stable companies that I don't feel like they will go kaput, not in the 5 years span.
If your stocks have significantly outperformed the market in recent years, it's because:

1. They were undervalued, and are now fairly valued.
2. They were fairly valued, and now are highly valued, compared to the market in general (which itself is already highly valued), or
3. The companies themselves have done better than they were expected to do at the time you bought the stocks.

If it's 1, your stocks now have the same expected return as the market in general, and you are taking unsystematic risk that, on average, you will not be compensated for.

If it's 2, your stocks now have a lower expected long-term return than the market in general (which already has a relatively low long-term expected return).

If it's 3, there's no reason to believe it will happen again, because future expectations are already priced into stocks; and it will be random as to whether or not future events are better or worse than current expectations.

The point is that your question shouldn't be "Will my stocks hold their value?" Your question should be "Will my stocks continue to outperform the market?" And if markets are efficient, there's no reason to believe before the fact that ANY given stock will outperform the market.

NibbanaBanana
Posts: 224
Joined: Sun Jan 22, 2017 10:34 pm

Re: To sell or not to sell

Post by NibbanaBanana » Thu Mar 08, 2018 11:12 pm

Similar situation but was about 25% individual issues. Am retiring shortly and had 0% bonds as of two years ago. From education and painful experience learned the risks of individual issues. Sold off enough individual issues to buy balanced VG mutual funds and some bond funds to bring bond allocation to 10%. That's a very good thing.

Will be writing a $25K check to uncle sam shortly. That's a very bad thing.

Hopefully the market will stay strong and will be able to sell more individual stocks to cover living expenses in the near future.

JW-Retired
Posts: 6957
Joined: Sun Dec 16, 2007 12:25 pm

Re: To sell or not to sell

Post by JW-Retired » Fri Mar 09, 2018 10:17 am

GoldenGoose wrote:
Thu Mar 08, 2018 3:36 pm
JW-Retired wrote:
Thu Mar 08, 2018 1:01 pm
2. Sell them and buy index funds

But your timing of this ought to consider the cap gain tax & AMT & other tax you might need to pay. We don't have any info about your fed & state cap gain tax rates but, depending on your income, your federal tax could be anywhere from 0 clear up to 20-something%, plus up to another 13% (if you live in CA). :shock:

If only 15% or less I wouldn't hesitate to sell much of these holdings ASAP so you don't have so much single stock risk.
JW
This is hard. The only reason I think I would sell is if I knew of an impending crash and I am preparing to hoard my cash for a chance to buy cheap. If I don't feel like there is such a crash, then why would I sell and buy index funds. Not to mention I have to pay cap gain taxes for no good reason. Decisions, decisions.
Goose,
That was my thinking when I rode this hot tech stock to the bottom and out. https://en.wikipedia.org/wiki/Lucent

But it was only a small percentage of our portfolio so not too much damage. Whew!
JW
Retired at Last

rai
Posts: 1148
Joined: Tue Apr 06, 2010 7:11 am

Re: To sell or not to sell

Post by rai » Fri Mar 09, 2018 4:31 pm

I appreciate people saying sell the stocks because Kodak happened ( etc. ).

What if this is the situation is this:

Individual stocks = 25% of all assets 70% of which is gains which would be taxed at 23.8% fed and 9% state so all together taxes paid would equal 5% of all savings.

No tax loss harvesting because we have been in such a good bull market.

IOW to sell all you need to pay 33% tax around 2 full years worth of contributions.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

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