Hit the stock jackpot through neglect - need an exit strategy

[Weekend_Gardener]

Edit: thank you to those who have responded! This is my first post and I made a lot of rookie omissions. I’ve included edits below.

A fabulous problem to have, but I'm stressing about it:

THE ISSUE: My husband was gifted a very small amount of two stocks [edit: MICROSOFT and AMGEN] in the late 90s and neglected them for years. They are held in a taxable account and have risen 1700% and 5000%. They now represent 25% of our family's total assets, and are almost entirely capital gains. Other than these two stocks, we have a messy approximation of a three fund portfolio across taxable, deferred, and Roth accounts. [edit: total portfolio mid six figures, a quarter of which is tax advantaged. MSFT and AMGN represent a third of our taxable assets.]

TAX INFO (if it matters): We're a single-income family. I've been a modest earner my whole life but recently moved into a high-earning position and am in the 32% tax bracket. [edit: we have an emergency fund, and I am now able to max out my employer’s 401k plus add to a college fund.] I don't like the work and will probably only hang in at this level for 5 years. In other words, we will likely never pay more taxes than we do now.

My question: What do I do with these stocks? Sell all and take the hit? Sell a bit at a time? Hold and watch for some market signal that it's a good time to sell?

Any recommendations and ideas are welcome. Thanks in advance for the help!

[Tamarind]

What does the rest of your tax situation look like? How far are you from the 37% bracket? Are you in the 15 or 20% bracket for capital gains?

There's definitely no market signal that can accurately tell you when to sell. Since these are single companies you pretty much have to assume they have the potential to become worthless on short notice. Are these big tech stocks that you already hold in your 3 fund portfolio or are they microcaps that have had surprising success recently?

I would be inclined to treat this as found money - sell as much immediately as will not upset your tax plans, and repeat each year until done. Invest the proceeds into your taxable account according to your plans.

If you were very certain you'd drop back into the 0% capital gains bracket at a specific future date I suppose you could consider holding them for the tax difference. But I personally wouldn't gamble on 25% of your assets holding their value for multiple years in single tech stocks when the amount you stand to save in taxes is more like 4% of your assets.

[HomeStretch]

Welcome to the forum!

As you (single income family) plan to retire or take a lower paying job in 5 years, it makes sense to re-evaluate your portfolio - i.e., diversify your holdings to de-risk, revisit your asset allocation, etc.

For best feedback, consider posting your financial picture in the “Asking Portfolio Questions” format found here:
https://www.bogleheads.org/wiki/Asking_ ... _questions. Include the capital gain or loss for each Taxable holding.

25% concentration in two single stocks is risky in my opinion. Despite your high tax bracket, sell to de-risk. Some general suggestions:
(1) turn off automatic dividend reinvestment, if on.
(2) sell any tax lots with no/little gain (perhaps recent tax lots from dividend reinvestment?)
(3) consider selling some amount each year starting in 2023 to bring the % down from 25%.

[barnaclebob]

I would sell enough at the end of each year to avoid hitting 20% long term gains tax rate. If they pay dividends, make sure they are set to pay cash and not reinvest.

[Mike Scott]

Can use stock for charitable donations instead of cash. Use cash to buy new funds.
Can balance gains against other losses if you have them.

[BrooklynInvest]

Are these big tech stocks that you already hold in your 3 fund portfolio or are they microcaps that have had surprising success recently?

Always a nice problem to have! Yeah, this would be my one question. If the money was significant from a quality of life perspective (and a 25% allocation would be to me) then I'd start to trim and pay the tax man.

The degree to which I'd trim would be somewhat dependent on the stocks - Apple-like mega caps I might keep more of, a Microcap I'd probably ditch almost all of. I'm not a stock picker but the relative stability and worst case for longevity would factor into my calculus. If my son inherits some apple stock with a big step up in basis everyone wins... well y'know.

[btq96r]

The market signal would be you losing value from what they are now. Not exactly an early warning system.

How are you doing at maxing out retirement accounts? You could use these stocks as a way to get to a max status. Pulling enough from them to fund a RothIRA each year and pay the estimated cap gains tax, or the same for cash flow as you max out a 401(k). This way you're reaping the gains of the stocks, but moving the money to a shield from future tax gains while reducing taxable income at the same time to offset some of the cap gains you'll pay by moving more of your paycheck to retirement deductions.

The charitable donation route works great if it's something you align with. Agree with others who more or less said to sell sooner rather than later if these are companies people don't know by name.

[Jack FFR1846]

Would you buy the stocks today if you didn't have them?

No? Sell them and pay the LTCG tax.

[EdNorton]

Sell your losers, let your winners run.

[Wiggums]

I wouldn’t panic after holding it 25 years, but I would selling some stock each year to reduce the concentrated risk.

[mark_in_denver]

Sell an equal number of shares each month for a year or so until you're comfortable with the risk.

[bikesandbeers]

If you already make regular charitable contributions, I would set up a donor advised fund (DAF) for a portion of the appreciated stock. I would then sell some each year staying in your current income/capital gains bracket.

Congrats on your good luck.

[secondopinion]

A fabulous problem to have, but I'm stressing about it:

THE ISSUE: My husband was gifted a very small amount of two tech stocks in the late 90s and neglected them for years. They are held in a taxable account and have risen 1700% and 5000%. They now represent 25% of our family's total assets, and are almost entirely capital gains. Other than these two stocks, we have a messy approximation of a three fund portfolio across taxable, deferred, and Roth accounts.

TAX INFO (if it matters): We're a single-income family. I've been a modest earner my whole life but recently moved into a high-earning position and am in the 35% tax bracket. I don't like the work and will probably only hang in at this level for 5 years. In other words, we will likely never pay more taxes than we do now.

My question: What do I do with these stocks? Sell all and take the hit? Sell a bit at a time? Hold and watch for some market signal that it's a good time to sell?

Any recommendations and ideas are welcome. Thanks in advance for the help!

Will you likely be in the 0% long-term capital gains tax bracket any time soon? If no, just sell them all at once tomorrow.

[Watty]

They now represent 25% of our family's total assets, and are almost entirely capital gains.

Your mutual funds will also own these stocks so you have an even larger exposure to them.

You may need to get professional tax preparation help but the first thing I would do would be to figure out just how much in taxes you would owe since in addition to the federal capital gains taxes you likely also would owe state income taxes, NIIT, and maybe other taxes.

Once you know for sure how much you will pay in taxes you can then also look at how much you might need to pay in taxes if you delay selling them for five or ten years. I would suspect that the best case scenario would be that you might pay 15% long term capital gains tax some day plus any state taxes.

If you would just pay the 20% federal long term capital gains taxes then that extra 5%(compared to 15%) would not be enough to merit keeping them longer.

The main thing is that you need to put a firm number on how much it would cost you in taxes to sell then now. Once you do that you can decide what to do.

You also need to consider the risk that you could hold the stocks for a few more years and the tax rates might be higher when you eventually sell them. There is also a non-zero chance that one of you could die and the survivor would then be filing tax returns in the higher single tax brackets.

[Moe Sanders]

Microsoft could keep growing indefinitely. I don't know anything about Amgen. Do you know how to read consolidated balance sheets and calculate intrinsic value?

[JazzTime]

I would hold MSFT. It's on everyone's buy list and venturing into Artif-Intell. You can sell a small amt over the next few years to diversify if that makes you more comfortable. AMGN I'm not sure about. Probably OK to hold, but again you can pair back a little at a time to diversify. BTW, both pay dividends - so nice in that respect.

Unfortunately, for those of us that hold stocks for a long time and have substantial gains, taxes are a real pain in the derriere. Bear in mind, let's say you sell $100K and pay $20K in taxes. Now you have only $80K to invest. Where are you going to invest that $80K that will recover the lost $20K and increase from there? Do you have that better investment?

Also note: your post proves the theory that the best investment strategy is "do nothing." Ignoring your portfolio is magic!

[mamster]

I would hold MSFT. It's on everyone's buy list and venturing into Artif-Intell. You can sell a small amt over the next few years to diversify if that makes you more comfortable. AMGN I'm not sure about. Probably OK to hold, but again you can pair back a little at a time to diversify. BTW, both pay dividends - so nice in that respect.

This makes absolutely no sense, but it's the easiest mistake in the world to make.

If everyone knows Microsoft is a great company with excellent future prospects, its stock will sell at a high price—which it does (PE 34 or so).

That means that Microsoft doesn't have to crater or go out of business to put a huge dent in your portfolio. It only has to moderately underperform expectations. I would absolutely not go into retirement with a huge proportion of my savings in MSFT.

As for the capital gains tax, unless you have good reason to believe that you'll be in the 0% bracket sometime soon, I would frame this as "the government already owns 15% of this stock, so from a tax perspective it's irrelevant when I let them have their share." I do think avoiding the 20% LTCG bracket is a good idea unless you're already in it.

[JazzTime]

I would hold MSFT. It's on everyone's buy list and venturing into Artif-Intell. You can sell a small amt over the next few years to diversify if that makes you more comfortable. AMGN I'm not sure about. Probably OK to hold, but again you can pair back a little at a time to diversify. BTW, both pay dividends - so nice in that respect.

This makes absolutely no sense, but it's the easiest mistake in the world to make.

If everyone knows Microsoft is a great company with excellent future prospects, its stock will sell at a high price—which it does (PE 34 or so).

That means that Microsoft doesn't have to crater or go out of business to put a huge dent in your portfolio. It only has to moderately underperform expectations. I would absolutely not go into retirement with a huge proportion of my savings in MSFT.

As for the capital gains tax, unless you have good reason to believe that you'll be in the 0% bracket sometime soon, I would frame this as "the government already owns 15% of this stock, so from a tax perspective it's irrelevant when I let them have their share." I do think avoiding the 20% LTCG bracket is a good idea unless you're already in it.

Saying it's irrelevant when you pay the tax seems to fly in the face of the general philosophy of most BHers on this forum. Mention dividends and they scream bloody murder that getting dividends is "tax inefficient" because you pay the tax each year. They want to delay paying that tax until death do they part from their portfolio. So selling one position only to purchase another position is the same thing - it's tax inefficient. (Btw - I don't subscribe to that philosophy. I love dividends. Dividend money in your pocket is not money your stock position can lose.)

MSFT has a high PE because the market believes its prospects are good. You are correct, market sentiment can change if its prospects diminish. But what's the alternative? Buy a lagging company where the market views its prospect as mediocre. Mediocre companies can continue to be mediocre for a very long time. If I were putting in new money, I might steer away from putting new money into a high PE company. But if I've been holding that company for many years, I would continue to hold it for the reasons already stated. I've made this statement many times: "If you sell a stock when it has grown 100%, you guarantee that you will never own a stock that has grown 1000%." In the OP's case, he/she has benefited from benign neglect, which, as I said, proves the point.

[cadzan]

I have the same problem as the OP. I have AMZN. I have owned it since the beginning. My average price after all the splits is $1.48/sh. My plan is to leave it in my will for the next generation. They will get the step-up value. They can sell it and think nice thoughts of me. Hopefully.

[aristotelian]

You can lose more in a day from a bad earnings report than you stand to save in taxes by not selling. Up to you how much you believe in the stock and are willing to take the risk, but using tax considerations to prevent you from selling is referred to as "tail wagging the dog".

[aristotelian]

I have the same problem as the OP. I have AMZN. I have owned it since the beginning. My average price after all the splits is $1.48/sh. My plan is to leave it in my will for the next generation. They will get the step-up value. They can sell it and think nice thoughts of me. Hopefully.

AMZN is a good case study for OP. It peaked at 185. Let's say they could have sold then in the 20% bracket but decide to spread out the sales to stay in the 15% bracket. The stock goes down to 85, now back to 115. That is a much bigger difference than the 5% tax savings. Maybe you have high conviction that AMZN goes back up but you are taking a huge risk, compared to which the tax savings could pale in comparison.

[grabiner]

As for the capital gains tax, unless you have good reason to believe that you'll be in the 0% bracket sometime soon, I would frame this as "the government already owns 15% of this stock, so from a tax perspective it's irrelevant when I let them have their share." I do think avoiding the 20% LTCG bracket is a good idea unless you're already in it.

It isn't quite irrelevant; taxes do create an advantage for continuing to hold the stock, because of the benefit of tax deferral.

Suppose you have $100K worth of stock with a $20K basis.

If you hold onto the stock and it doubles in value, you have $200K of stock with a $20K basis, which becomes $173K if you pay 15% capital-gains tax.

If you sell the stock and pay 15% capital-gains tax, you have $88K left to reinvest. If that $88K doubles in value to $176K, and then you sell that stock. you pay $13,200 tax on the $88K gain and have $162,800 to spend.

There is a larger advantage for holding if you never sell. If the stock doubles in value and then you die, your heirs get $200K if you hold the original stock, or $176K if you sold at $100K.

So this has to be balanced against the risk of holding too much of your portfolio in a single stock. If the single stock loses half its value and the rest of the market is flat, or the single stock stays at the same value and the rest of the market doubles, you have a big loss, and it's worth paying some extra taxes to avoid that.

In situations like this, I would normally advise selling down to about 10% of your stock allocation in a single stock.

[JazzTime]

You can lose more in a day from a bad earnings report than you stand to save in taxes by not selling. Up to you how much you believe in the stock and are willing to take the risk, but using tax considerations to prevent you from selling is referred to as "tail wagging the dog".

If you are going to be a nervous nellie with every earnings report, then you shouldn't own stocks. The ups and downs of the market are called "volatility." It happens. Get used to it. Or get out. Obviously, tax considerations are not the only considerations in one's decision making process. Then again, given the number of posts on the subject, it seems that many BHers love tax loss harvesting. What exactly is that tax tail wagging?

[milktoast]

If you are in 23.8% effective capital gains rate, you could consider a CRUT. Takes a while to break even but if you live long enough you’ll come out ahead.

[Aggieland]

I am curious how does one handle the past year tax returns changes( if at all?). If these companies paid dividends and were not accounted for 2 decades?

[8301]

Would you buy the stocks today if you didn't have them?

No? Sell them and pay the LTCG tax.

Not the same because of taxes. 15%+3.8%+state tax

[8301]

You can lose more in a day from a bad earnings report than you stand to save in taxes by not selling. Up to you how much you believe in the stock and are willing to take the risk, but using tax considerations to prevent you from selling is referred to as "tail wagging the dog".

If you are going to be a nervous nellie with every earnings report, then you shouldn't own stocks. The ups and downs of the market are called "volatility." It happens. Get used to it. Or get out. Obviously, tax considerations are not the only considerations in one's decision making process. Then again, given the number of posts on the subject, it seems that many BHers love tax loss harvesting. What exactly is that tax tail wagging?

Don't confuse the market volatility with the very risk of holding a significant amount of single company stock. They may appear similar, but they are two different animals.

[privateer79]

a few suggestions:
create a donor advised fund at someplace like fidelity and donate a sizeable chunk of your anticipated lifetime giving in stock over the next few years... you avoid paying capital gains, get a deduction for that amount this year, and can then portion out that money to charitable organizations over the rest of your life by "advising" the fund to disburse funds.... if you do this, you may want to consider if its wiser to make smaller donations over a few years, or make one big one. (usually depending on if you itemize your tax deductions or take the standard deduction)

if you happen to have children (or other friends you'd be willing to gift money to) that make 0 income, you can gift each of them ~2500$ a year, and they can sell the shares a for 0 capital gains. if you do this with your kids, the money must be used for your kids benefit beyond typical parental support (i.e. travel, sports, lessons.... but not food or shelter)

harvest losses elsewhere.... if you have any large unrealized losses, you may want to sell them to offset the gains.... alternatively you may prefer to take those loses against income (being the 32% bracket)and so may be better served by paying capital gains tax on your winnings, then realizing losses in later years that you can then take 3k$/year "off the top" of your income.

best of luck!

[8301]

There is also a non-zero chance that one of you could die and the survivor would then be filing tax returns in the higher single tax brackets.

Depending on state, the tax basis may be stepped up.

[mamster]

It isn't quite irrelevant; taxes do create an advantage for continuing to hold the stock, because of the benefit of tax deferral.

Point taken—thank you.

[aristotelian]

You can lose more in a day from a bad earnings report than you stand to save in taxes by not selling. Up to you how much you believe in the stock and are willing to take the risk, but using tax considerations to prevent you from selling is referred to as "tail wagging the dog".

If you are going to be a nervous nellie with every earnings report, then you shouldn't own stocks. The ups and downs of the market are called "volatility." It happens. Get used to it. Or get out. Obviously, tax considerations are not the only considerations in one's decision making process. Then again, given the number of posts on the subject, it seems that many BHers love tax loss harvesting. What exactly is that tax tail wagging?

It's not a question of risk tolerance, just fact that individual companies can go up and down way more and faster than the market as a whole. As I said if you believe in the stock and can afford to lose a large portion of your portfolio, go for it. In general, higher risk should be compensated with higher expected return and that is the case only with diversified index funds or very large numbers of stocks. OP has 25% of their portfolio in these stocks and owns them only through "neglect". My understanding from OP is they are not comfortable with the position so my advice would be to get rid of it. If they had high conviction and wanted to risk it, that would be up to them. The worst of both worlds is to want to get rid of it but keep it to save 5% on taxes.

[niagara_guy]

Long term capital gains apply to stocks held more than 1 year, so the sale of these stocks will be long term capital gains. The federal tax rate is lower than the tax rate for earned income so selling stock may have lower taxes than what you think (don't forget to calculate the state taxes as well). You might want to model what your taxes will look like (using 2022 tax software to model 2023 taxes is probably close enough).

I agree that it's risky to hold individual stocks in a portfolio. However, selling all this stock in 2023 might cost a lot in taxes, so maybe selling part in 2023 and part in early 2024 would make sense. If so, you take the chance that these stocks fall and you would have been better off selling now and taking the tax hit. It's a gamble either way. Think about some of the market tanks (2008,dot com bust, 2020, ...)

[secondopinion]

I would hold MSFT. It's on everyone's buy list and venturing into Artif-Intell. You can sell a small amt over the next few years to diversify if that makes you more comfortable. AMGN I'm not sure about. Probably OK to hold, but again you can pair back a little at a time to diversify. BTW, both pay dividends - so nice in that respect.

This makes absolutely no sense, but it's the easiest mistake in the world to make.

If everyone knows Microsoft is a great company with excellent future prospects, its stock will sell at a high price—which it does (PE 34 or so).

That means that Microsoft doesn't have to crater or go out of business to put a huge dent in your portfolio. It only has to moderately underperform expectations. I would absolutely not go into retirement with a huge proportion of my savings in MSFT.

As for the capital gains tax, unless you have good reason to believe that you'll be in the 0% bracket sometime soon, I would frame this as "the government already owns 15% of this stock, so from a tax perspective it's irrelevant when I let them have their share." I do think avoiding the 20% LTCG bracket is a good idea unless you're already in it.

Saying it's irrelevant when you pay the tax seems to fly in the face of the general philosophy of most BHers on this forum. Mention dividends and they scream bloody murder that getting dividends is "tax inefficient" because you pay the tax each year. They want to delay paying that tax until death do they part from their portfolio. So selling one position only to purchase another position is the same thing - it's tax inefficient. (Btw - I don't subscribe to that philosophy. I love dividends. Dividend money in your pocket is not money your stock position can lose.)

MSFT has a high PE because the market believes its prospects are good. You are correct, market sentiment can change if its prospects diminish. But what's the alternative? Buy a lagging company where the market views its prospect as mediocre. Mediocre companies can continue to be mediocre for a very long time. If I were putting in new money, I might steer away from putting new money into a high PE company. But if I've been holding that company for many years, I would continue to hold it for the reasons already stated. I've made this statement many times: "If you sell a stock when it has grown 100%, you guarantee that you will never own a stock that has grown 1000%." In the OP's case, he/she has benefited from benign neglect, which, as I said, proves the point.

In this situation, what started as an insignificant amount of the portfolio for a speculation has became rather large. In the risk management side, it is somewhat dangerous to have 25% of the entire portfolio in two stocks; if it were say 10% in two stocks and they were among the best of companies, then it would be more manageable. Taxes or no taxes, the position needs to be at least reduced by half; the idea of gifting to any children for them to handle at a better tax rate or donating the shares are good idea if they must avoid the tax drag. Otherwise, the risk is probably not worth the tax savings.

As far as holding tight if it were more like 10% for the two stocks, I have absolutely no problem getting dividends to take risk off the table. When there is a lot of capital gains, selling stock is near identical to getting an dividend tax-wise. All companies fail eventually, so there must be some money coming out of the investment somehow at some point for it to mean anything but what it says on paper.

[Weekend_Gardener]

Thanks so much everyone! Here are my takeaways:

1. Build a plan to sell down to a portfolio % I am more comfortable with (10% in my case)
2. Avoid the 20% capital gains bracket
3. Move a portion into a fund for charitable giving
4. Gift $2,500 per year to each child; they will not have capital gains on the gift.

Does anyone have more information on how to do #4? Can I put it directly into a 529 plan?

[mervinj7]

Thanks so much everyone! Here are my takeaways:

1. Build a plan to sell down to a portfolio % I am more comfortable with (10% in my case)
2. Avoid the 20% capital gains bracket
3. Move a portion into a fund for charitable giving
4. Gift $2,500 per year to each child; they will not have capital gains on the gift.

Does anyone have more information on how to do #4? Can I put it directly into a 529 plan?

Quick question, have you been paying taxes on the dividends?

[grabiner]

Thanks so much everyone! Here are my takeaways:

1. Build a plan to sell down to a portfolio % I am more comfortable with (10% in my case)
2. Avoid the 20% capital gains bracket
3. Move a portion into a fund for charitable giving
4. Gift $2,500 per year to each child; they will not have capital gains on the gift.

Does anyone have more information on how to do #4? Can I put it directly into a 529 plan?

Contributions to a 529 plan must be made in cash, so if you want to use the stock to fund a 529, you need to sell it first.

If you want to give stock to your children, you have to set up a UGMA/UTMA account for each child, and transfer the stock. The child will have the same capital gain as you, but can have $2500 in unearned income (capital gains, dividends, and bank interest) without being subject to the kiddie tax. Note that this money then belongs to the child; they will get control of the account when they reach 18. If you want to retain control of the money to ensure it is used for college, you need to fund a 529 in your own name with the child as beneficiary; this has the additional benefit that growth will be tax0free.

[randomguy]

Edit: thank you to those who have responded! This is my first post and I made a lot of rookie omissions. I’ve included edits below.

A fabulous problem to have, but I'm stressing about it:

THE ISSUE: My husband was gifted a very small amount of two stocks [edit: MICROSOFT and AMGEN] in the late 90s and neglected them for years. They are held in a taxable account and have risen 1700% and 5000%. They now represent 25% of our family's total assets, and are almost entirely capital gains. Other than these two stocks, we have a messy approximation of a three fund portfolio across taxable, deferred, and Roth accounts. [edit: total portfolio mid six figures, a quarter of which is tax advantaged. MSFT and AMGN represent a third of our taxable assets.]

TAX INFO (if it matters): We're a single-income family. I've been a modest earner my whole life but recently moved into a high-earning position and am in the 32% tax bracket. [edit: we have an emergency fund, and I am now able to max out my employer’s 401k plus add to a college fund.] I don't like the work and will probably only hang in at this level for 5 years. In other words, we will likely never pay more taxes than we do now.

My question: What do I do with these stocks? Sell all and take the hit? Sell a bit at a time? Hold and watch for some market signal that it's a good time to sell?

Any recommendations and ideas are welcome. Thanks in advance for the help!

You are making 340k+/year. If you start saving 100k/year, it will not be long before these stocks are a much smaller proportion of your net worth... If you do any charitable giving, funding the next say decade of it might make sense. Get a tax deduction when you are at your highest income and do the donations later. But otherwise you are probably looking at 18% now or 15% later + state taxes. To me that isn't enough to take on the risk. Sell 25-50k/year of this stock til you get it to a place where your are comfortable with it.

[rkhusky]

DAF donations of stock are limited to 30% of your AGI. So, doing that in a high earning year allows you to put more in. Plus, the deduction is worth more in a higher tax bracket. Plus, if you are currently using the standard deduction, a large DAF contribution allows you to itemize and deduct mortgage interest, state taxes, and non-DAF charitable contributions. Once the money is in the DAF, you can cause it to be disbursed over a number of years.

[illumination]

I'd look into setting up a stop loss on at least some of it while you figure it out. That has its own pitfalls if it gets triggered from volatility, but that would at least allow you to lock in such a large part of your portfolio if something happens and limits downside risk. Before I embraced a more Boglehead approach with index funds, stop losses really saved me on my lingering individual stock positions. Like I had Boeing that I hadn't sold with a large gain, thank goodness that stop loss was there when Air Maxes start having issues. Got cut in half almost immediately and then almost half again during Covid. I locked in a large part of my gains before it got bad.

If I was going to start trimming these positions, I'd probably start with Amgen, just because I think it's more volatile than something like Microsoft that has such a dominant position. But both companies are solid and I don't see either "collapsing" anytime soon. This is just speculation, but I also think those big gains are behind it and its probably going to be more market-like returns in the future.

Unless you had a tax situation that was radically changing in the very near future (like retirement) I'd at least start selling some of it. It doesn't have to be all or nothing.

Taxes are just inevitable, if you sit on this for another 10 years, it's likely just going to be an even bigger tax bill. About the only real escape is death with the stepped up basis. I also wouldn't want the stress of so much of my net worth being in two companies.

[niagara_guy]

Many many moons ago I worked with a guy who had all his eggs in the company stock, maybe a million dollars in today's dollars. The company was flying high, so he had become rich on the stock, but the company declared bankruptcy and he lost it all. I won't hold company stock in my portfolio.

[secondopinion]

I'd look into setting up a stop loss on at least some of it while you figure it out. That has its own pitfalls if it gets triggered from volatility, but that would at least allow you to lock in such a large part of your portfolio if something happens and limits downside risk. Before I embraced a more Boglehead approach with index funds, stop losses really saved me on my lingering individual stock positions. Like I had Boeing that I hadn't sold with a large gain, thank goodness that stop loss was there when Air Maxes start having issues. Got cut in half almost immediately and then almost half again during Covid. I locked in a large part of my gains before it got bad.

If I was going to start trimming these positions, I'd probably start with Amgen, just because I think it's more volatile than something like Microsoft that has such a dominant position. But both companies are solid and I don't see either "collapsing" anytime soon. This is just speculation, but I also think those big gains are behind it and its probably going to be more market-like returns in the future.

Unless you had a tax situation that was radically changing in the very near future (like retirement) I'd at least start selling some of it. It doesn't have to be all or nothing.

Taxes are just inevitable, if you sit on this for another 10 years, it's likely just going to be an even bigger tax bill. About the only real escape is death with the stepped up basis. I also wouldn't want the stress of so much of my net worth being in two companies.

Right. Also, I would not be hoping for an early death just because I do not want to pay taxes on good fortune; quite honestly, even donating the stock does not make that much sense unless you were planning on donating anyway. What people do to avoid taxes... If I all of the sudden got $10 million dollars, the last thing I would be worrying about is the taxes; it might be a lot of taxes to pay, but losing it in an attempt to avoid taxes would feel much worse. I could retire on the after-tax with the hypothetical immediately; if I wait, I might not.

[siriusblack]

Since these companies are both in the Dow 30, there are free "value line" reports on both of these companies available online. (You have to buy a VL subscription if you want to research any company outside the Dow Jones.)

Go here:
https://research.valueline.com/research ... 0&sec=list

Then download the PDF for Amgen and Microsoft.

These companies are not going to collapse anytime soon. Both have value line's highest rating for safety, and you can see their net financial position on the left.

My advice: Don't do anything impulsive. Take your time, plan, and implement a diversification strategy that strikes the balance you need (across tax, portfolio AA, etc.)

[beardsicles]

Parenthetical, but as someone who worked for many years, it's agonizing to see DAFs just tossed off as a solution to a tax problem. It's bad for non-profits and it's bad for society.

[NateH]

don't forget to include the 3.8% NIIT in all of your cap gains tax calculations.
If/when you leave your high-paying job, maybe that tax will go away and make it better for your household to sell more of these shares.

[Capster1]

I prefer to come at it from “How much am I willing to lose?”

If Microsoft fell 50%, what would that do your life? I would sell off each year until that number no longer made me uncomfortable. Talk to an accountant about the tax situation.

I’d also take that money and put it into my retirement accounts so I could potentially write it off.

[miket29]

experiment with tax estimators online such as https://turbotax.intuit.com/tax-tools/c ... /taxcaster

Compare the estimated taxes from selling part or all of that stock to the risk you're assuming if you sell part or none of it. Make a decision which is better for you, sell or hold. IMO holding individual stocks, especially just two rather than a basket, is pretty risky. On the other hand with your new higher income (congrats!) maybe a potential loss is less important to you than it was a few years ago and you're willing to take the risk since it won't be a big financial hit if the stocks plunge.

[grabiner]

DAF donations of stock are limited to 30% of your AGI. So, doing that in a high earning year allows you to put more in.

The excess is not wasted, just delayed to the following year as a carryover. So if your AGI is $400K each year and you donate $360K of appreciated stock now, you can deduct $120K for each of the next three years.

[Hector]

Looks like you don’t need that $$. Just forget about them and do nothing.

[scubahead]

If you would like to eventually leave money for your children, I would suggest holding these stocks for that purpose. The step up in basis at death would eliminate all taxes.