Highly concentrated stock positions & seeking feedback (AAPL, GOOGL)

[indexin99]

Hi all, I am well concentrated in AAPL and GOOG and have been riding out AAPL for sometime with some gains. I am in a position where I am confident in AAPL's future, but know that I carry a significant risk in my Buffett sized allocation of my Net Worth. Note that the AAPL position is >$1 million post long term capital gains.

Age 37, Kids 3, filed married + wife not working

Taxable Stocks
Ticker Name Value
AAPL Apple Inc $1,246,102.40
GOOGL Alphabet Inc Class A $8,169.00
GOOG Alphabet Inc Class C $336,687.13
AMZN Amazon.com Inc $17,539.20
BABA Alibaba Group $7,108.01
DIS Walt Disney Co $5,903.64
SQ Block Inc $824.60
FB Meta Platforms Inc $1,852.60
GBTC Grayscale Bitcoin Trust (Btc) $4,441.50
NUGT Direxion Daily Gold Miners Index Bull 2X Shares $290.00
VTI Vanguard Total Stock Market Index Fund ETF $9,168.59
Total Stocks $1,638,086.67

Schwab Intelligent $86,000.00
All Taxable $1,724,086.67

Retirement $448,500.00
529 2 kids $50,000.00

Income Gross W2 $300,000

IN SUMMARY

An advisor is trying to convince me into AAPL covered calls for .75% Assets under management and putting the proceeds in a managed tax efficient fund. I feel like this is probably not the best route.

I am a long term reader of Bogleheads and have obviously not followed the index approach and done well because of it; however, looks like I need to diversify a bit of AAPL to sleep at night. I am very bullish but anything can happen! I am considering a 3 or 5 year diversification plan out of AAPL and keeping about 30% of my position. I am struggling on how to plan for this and worried about losing upside in the stock (very bullish on future). Would be really helpful to hear from others if you have diversified to remove the emotions out of it. Also, feel like I want to diversify and DCA my positions but not sure that's the ideal means to do it.

Possible long term Taxable Plan:

Type Holding
US Total Market 80% VTI & TLH with SCHB
International 20% VXUS & TLH with IXUS

[er999]

What’s your cost basis in Apple and Google? If it’s less than 10% I’d consider this like a lottery returns and maybe sell and switch to broad based indexes despite the tax hit. However, 1.5 million in 2 stocks isn’t enough to be financially independent and you already have a lot of individual stocks so I’d think about what your plan is going forward, do you want to continue to speculate in individual stocks?

At $300k in income your are doing well but if spending is average for that income with a family likely still have another 10+ years of work. How would you feel if your 1.5 million dropped in half; losing perhaps 10 years of contributions? With Apple so high hard to believe it can double again in 10 years (as it’s 6% of the US market already) so maybe be lucky you’ve (presumably) made so much off those 2 stocks.

[indexin99]

Thanks...my cost basis is low so looking at about 1.1m capital gains on that 1.5m. Could I stomach a downturn.of 50%? Probably, but assuming if I went to an index I could experience the same in a recession. I believe it would recover. On the flip side, could I stomach VTI going up 50% in years while AAPL goes 100%? That would sting.

To your other question, I want out of stocks longer term and plan to simplify for retirement purposes and quality of life. Going with the volatility of these mag 7 is stressful at times, but I've been very lucky.

[pizzy]

Thanks...my cost basis is low so looking at about 1.1m capital gains on that 1.5m. Could I stomach a downturn.of 50%? Probably, but assuming if I went to an index I could experience the same in a recession. I believe it would recover. On the flip side, could I stomach VTI going up 50% in years while AAPL goes 100%? That would sting.

To your other question, I want out of stocks longer term and plan to simplify for retirement purposes and quality of life. Going with the volatility of these mag 7 is stressful at times, but I've been very lucky.

No one giving rational advice is going to tell you to keep 75% of your portfolio in two tech stocks. You know that.

Is there a chance that divesting from those stocks leads to lower overall returns? Yes. But you know that too.

Which path will lead to higher overall returns? No one knows that.

I wouldn't be able to sleep at night knowing my retirement depended on one company's stock.

[abc132]

Sell each year up to the top of your current tax bracket and strongly consider going up one more. That should give you some additional diversification in the next 6 weeks with December and January sales.

Stop reinvesting dividends for AAPL.

Invest new money opposite these investments (fixed income, small, etc).

[indexin99]

True. Conflicting feelings knowing what got me to this point versus the "responsible" steps moving forward. When to cash in your chips...

[indexin99]

Sell each year up to the top of your current tax bracket and strongly consider going up one more. That should give you some additional diversification in the next 6 weeks with December and January sales.

Stop reinvesting dividends for AAPL.

Invest new money opposite these investments (fixed income, small, etc).

They are long term capital gains so shouldn't impact tax bracket. Again, my question is more around how I might sell lots and reinvest them in a practical manner into index funds. I feel that if we do go into recession next year, then a lump sum could burn me.

[er999]

Thanks...my cost basis is low so looking at about 1.1m capital gains on that 1.5m. Could I stomach a downturn.of 50%? Probably, but assuming if I went to an index I could experience the same in a recession. I believe it would recover. On the flip side, could I stomach VTI going up 50% in years while AAPL goes 100%? That would sting.

To your other question, I want out of stocks longer term and plan to simplify for retirement purposes and quality of life. Going with the volatility of these mag 7 is stressful at times, but I've been very lucky.

That’s the dilemma. You’ve gotten a 2.8x return, and won’t get that in an index fund as quickly, but also don’t have the risk of losing it as quickly. The vanguard total market is 6.2% Apple, 6.1% Microsoft, 3.2% (Google a and c). Seems like Microsoft is the AI favorite, but perhaps the market is wrong and google isn’t the old school dinosaur unable to adapt to new technology and wins the AI race. Perhaps google jumps to 6% in a few years and Microsoft back to 3% and then you’ve doubled your google position.

No one knows the future, although I think it’s reasonable to say to won’t 10x your money with google or Apple, as very unlikely either would grow to 60% or 32% of the market, despite what AI evangelicals predict.

You’d pay $165-$220k in taxes to cash out your 1.1 million in profit (15-20% capital gains), left with 1.3 million so only you can decide if it’s worth it. If you can’t decide perhaps sell a smaller amount per month (maybe 2% or $30k / month and then buy total market same day)

Most posters on here would say to sell, but they also wouldn’t have bought and held for a 2.8 x return so you wouldn’t have gotten those gains with their mentality (and I include myself as one of them).

Also if Apple and google crash likely the indexed will be down since they make up 9% of the index. It could be though the price stays constant and something else grows more. Look at nividia — up 1200% past 5 years vs Apple 344%. The index makes sure you own a small piece of the future winners, and that piece grows larger as that company succeeds, although VTI is only up 65% these past 5 years.

I’d also say you only want to have to get rich once, 1.3 million in a total market or total world should get you to 3 million with no additional contributions in 20 years (4% real return, could be higher), and if you contribute $40k/ year would be 4 million in your mid 50s. All tech stocks may get you more, maybe less (most would predict less on this board)

[alex_686]

An advisor is trying to convince me into AAPL covered calls for .75% Assets under management and putting the proceeds in a managed tax efficient fund. I feel like this is probably not the best route.

Why don't you feel that this is the best route?

On that, 2 points.

I am a modest advocate for advisors. They probably can't beat the market but they can add value in situations like this. The fee is in the ball park.

Next, why are they suggesting covered call? What is the long term plan here? For that fee I might be expecting something a bit more sophisticated.

[indexin99]

An advisor is trying to convince me into AAPL covered calls for .75% Assets under management and putting the proceeds in a managed tax efficient fund. I feel like this is probably not the best route.

Why don't you feel that this is the best route?

On that, 2 points.

I am a modest advocate for advisors. They probably can't beat the market but they can add value in situations like this. The fee is in the ball park.

Next, why are they suggesting covered call? What is the long term plan here? For that fee I might be expecting something a bit more sophisticated.

This would include comprehensive financial planning, banking and credit management, risk management and insurance, estate planning, and tax planning. The fear is being locked into a long term AUM fee when diversifying myself may be just as good in the long run. I am not good with $9k without a very clear plan.

[er999]

Also make sure to check out this thread about someone who regrets not loading up on tech stocks:

viewtopic.php?t=411317

So it’s possible that you might regret changing strategies. To be fair the winning move this past decade wasn’t following bogleheads strategies — best for making money was no international, load up on tech stocks, borrow a large mortgage to buy real estate, buy speculative assets, etc. Indexing might be the best way to stay wealthy over decades, though.

[alex_686]

This would include comprehensive financial planning, banking and credit management, risk management and insurance, estate planning, and tax planning. The fear is being locked into a long term AUM fee when diversifying myself may be just as good in the long run.

Trying to be helpful, what would your plan be?

The simplest plan would be to sell now, take the tax hit, and reinvest into a diversified portfolio. Since this is the simplest plan this should be your base plan, your neutral viewpoint to evaluate other options.

[indexin99]

This would include comprehensive financial planning, banking and credit management, risk management and insurance, estate planning, and tax planning. The fear is being locked into a long term AUM fee when diversifying myself may be just as good in the long run.

Trying to be helpful, what would your plan be?

The simplest plan would be to sell now, take the tax hit, and reinvest into a diversified portfolio. Since this is the simplest plan this should be your base plan, your neutral viewpoint to evaluate other options.

Thanks for the input. Plan would be to either sell immediately a portion or to stage it over a period of time to manage annual taxes. I don't have a substantial amount of information from Schwab to determine the profit potential of covered calls and the exact fund they'd diversify into. My fears that I would get into something a bit more complex than what I'm looking for. I'd prefer VTI and VXUS to self manage it.

[alex_686]

Thanks for the input. Plan would be to either sell immediately a portion or to stage it over a period of time to manage annual taxes. I don't have a substantial amount of information from Schwab to determine the profit potential of covered calls and the exact fund they'd diversify into. My fears that I would get into something a bit more complex than what I'm looking for.

If you are willing to spend 4 to 20 hours or so you can master covered calls. As derivatives go it is the easiest and least risky strategy to master.

BTW, covered calls (kind off) reduces your portfolio's risk and thus reduces your protentional payout. Protective puts would more directly reduce your risk.

[indexin99]

Thanks for the input. Plan would be to either sell immediately a portion or to stage it over a period of time to manage annual taxes. I don't have a substantial amount of information from Schwab to determine the profit potential of covered calls and the exact fund they'd diversify into. My fears that I would get into something a bit more complex than what I'm looking for.

If you are willing to spend 4 to 20 hours or so you can master covered calls. As derivatives go it is the easiest and least risky strategy to master.

BTW, covered calls (kind off) reduces your portfolio's risk and thus reduces your protentional payout. Protective puts would more directly reduce your risk.

Any personal thoughts on the ideal path? There is always hold most (which bogleheads wouldn't agree)

[alex_686]

Any personal thoughts on the ideal path? There is always hold most (which bogleheads wouldn't agree)

Glancing over to my bookshelf which is groaning under the weight of theoretical and practical applications of investing....Maybe I am not the best person to ask...

First step, write up a Investment Portfolio Statement (IPS). What are you goals, risk tolerance, etc. Get a solid foundation of where you are and where you want to be.

https://www.bogleheads.org/wiki/Investm ... _statement

Once there you can start asking better questions.

Maybe you are risk adverse and don't need to take on much risk. In that case just sell.

Or maybe not.

Any other choice is going to be more complex, probably be riskier, and will probably offer more returns.

I wouldn't do covered calls. It is a valid choice but it also psychologically the easy choice which can lead to some cognitive errors. Hint, it is not free money.

I might do protective puts or a zero cost collar. Converts you AAPL and GOOGL into something more bond like. You can actually turn the dial all the way up and actually convert it so it is bond like.

I might aggressively invest into assets with a low correlation with AAPL and GOOGL. Odds are that something will blow up and you can tax harvest the other. Used to do this for a living. The math is interesting. More of a art than science. This is a flavor of direct indexing. I think the automated computer systems are ready for prime time. Maybe People post about them here. One of the more complex options out there.

I would probably just let it ride and invest new money into a value index. Then tax harvest when I could. Kind of a low rent version of the above option. I would criticize myself of not being purely rational.

[Commoner]

You have a great stock. Apple isn't going anywhere - and if Apple stock drops 50%, the overall market will be getting crushed too. I think your biggest risk is Apple going down slightly and the overall market going up. But who knows...

With that said, you have way too much Apple. If I was in your position, here is what I would do:

- Stop reinvesting dividends. Invest all future dividend payments into VOO.

- Chose a percentage of Apple you want to sell. I would probably sell 25% -35%. Anything more than that would cost too much in taxes IMHO.

- Figure out the tax implications before you do anything. If you have been reinvesting your dividends, sell those share first. You will have less gains, and less taxes to pay. A small percentage of that may be short term capital gains (this year's dividend purchases).

- Set aside the future tax bill money from the proceeds of the sale. Place the future tax money into a short term T-Bill or CD to gain interest while you wait for the tax payment.

- Reinvest the remainder of the Apple proceeds into VOO.

And congrats! Investing your money into Apple was a fantastic decision for you and your family!

[alex_686]

- Set aside the future tax bill money from the proceeds of the sale. Place the future tax money into a short term T-Bill or CD to gain interest while you wait for the tax payment.

Keep the future tax bill money in Apple. Lots of issues otherwise.

A better choice would be giving APPL and GOOGL a haircut. Value them at only 80% to 60% of their market value. A rule of thumb is to give a position a 20% haircut if concentrated or if it is low cost basis.

This is a quick and dirty risk control methodology.

[indexin99]

You have a great stock. Apple isn't going anywhere - and if Apple stock drops 50%, the overall market will be getting crushed too. I think your biggest risk is Apple going down slightly and the overall market going up. But who knows...

With that said, you have way too much Apple. If I was in your position, here is what I would do:

- Stop reinvesting dividends. Invest all future dividend payments into VOO.

- Chose a percentage of Apple you want to sell. I would probably sell 25% -35%. Anything more than that would cost too much in taxes IMHO.

- Figure out the tax implications before you do anything. If you have been reinvesting your dividends, sell those share first. You will have a less gains, and less taxes to pay. A small percentage of that may be short term capital gains (this year's dividend purchases).

- Set aside the future tax bill money from the proceeds of the sale. Place the future tax money into a short term T-Bill or CD to gain interest while you wait for the tax payment.

- Reinvest the remainder of the Apple proceeds into VOO.

And congrats! Investing your money into Apple was a fantastic decision for you and your family!

Thanks. wrt to VOO I was thinking similarly but VTI. With a potential volatile market, DCA over the next year. Maybe best to lump sum though. If I DCA then if I capture any losses, I can TLH with VOO.

[KlangFool]

OP,

1) What is your current annual savings/investment? Let's call this as S

2) What is your current annual expense? Let's call this as E

3) What is your portfolio size in terms of S? This gives you years of savings

4) What is your portfolio size in terms of E? This is gives you years of expense.

5) If those stocks drops 50%, how many years of saving do you lose?

6) What is the answer for 4? If it is 30E to 40E, why are you taking those risk? You are financially independent.

7) Can you afford to take the concentrated risk of AAPL and GOOGL?

8) Sell all individual stocks until they are 5% or less of your total portfolio.

KlangFool

[shess]

I'd sell everything except the GOOG and AAPL and put it in VTI. The GOOGL implies that you've held the shares for awhile, so maybe keep that for sentimental reasons. Anyhow, start building your VTI position in taxable. Make sure you aren't reinvesting dividends in AAPL. [If you really really really want to keep your positions in Block and Facebook, then maybe you need to do some introspection to figure out what you even want. Do you want the thrill of the hunt, or a safe retirement?]

Then I'd run the numbers and see where you can be in ten years. Will AAPL and GOOG still dominate your portfolio like this, or will they be less than half? This requires some assumptions, obviously, I'd probably just assume AAPL and GOOG will match the market, and that your income will stay more-or-less steady, and that you can continue to pump dollars into retirement (and maybe taxable) funds, unless you have reasons to make other assumptions.

Anyhow, where I'm going with all of this is that a portfolio with 50% AAPL is scary, but if it was 20%, that would be easier, and if it was 10%, well, I'm not sure how nervous I am about that at all. Likewise, if you could retire on the non-AAPL part of your portfolio, do you really care how much AAPL you have? It's all a tool, you need to figure out how you want to use the tool. If you want to retire early, you either want to double down (with a plan to unload later!), or diversify now to lock your gains in. With your income and current portfolio, you should be able to chart a very safe and steady path to retirement, without taking risks. I get it, risks are fun to take, but what is the point?

Something that bothers me about things like covered calls is that you haven't resolved the problem, you've just patched around it for awhile, and you'll have to continue doing so. You're attempting to give up the potential of the asset without giving up the asset, and you could find yourself regretting your new contrived position even more than simply selling. My experience with selling is that after a few years I just don't mentally track my "losses" from gains that happened later, perhaps because I continued to hold shares, so I still participated? I dunno. The tax hit is hard to swallow, but you get over it, doing a lot of DAF contributions helped.

Personally, I think it is hard to argue the case that a huge company like Apple or Google is going to continue outperforming the market to the extent that they, simply because they have BECOME the market. I also think they have reached a size where they are unlikely to simply tank, except over the course of a decade or more. So I have worked my positions in companies of this sort down to a proportion of my portfolio that lets me sleep at night, but I endeavor to not count them as retirement funds. They'll be donated or passed to heirs.

[KlangFool]

I'd sell everything except the GOOG and AAPL and put it in VTI.

shess,

How does that helps OP when AAPL equal to 1.2m out of 1.6m of OP's individual stock portfolio?

OP might be working for AAPL too.

KlangFool

[rule of law guy]

congrats on the AAPL holding. compare growth prospects between AAPL and NVDA. I would agree with FA that AAPL have leveled off growth, is now a consumer products not tech company. NVDA is now where AAPL was with iPhone introduction imo. selling covered calls is a good way to generate income for AAPL in addition to dividend.

[KlangFool]

I am in a position where I am confident in AAPL's future,

indexin99.

But, that may not have anything with the future of AAPL's stock price.

The current AAPL P/E ratio is 30+. In order for AAPL's stock to move higher, the earning needs to grow much more than 30% per year. Do you believe that it can consistently beat that expectation over the next few years?

KlangFool

[nvrmnd]

Have you considered direct indexing to harvest losses?

This recent paper by AQR suggests they can harvest losses 57%-95% of your losses in 1 year. So you could in theory sell all your stock on Jan. 1 and deposit all this cash into a direct index service and harvest enough to offset the gains before EoY. If the paper is to be believed.

https://www.aqr.com/Insights/Research/J ... -Investing

Though, I'm not sure if AQR will do this for you for deposits less than $10m

[indexin99]

I am in a position where I am confident in AAPL's future,

indexin99.

But, that may not have anything with the future of AAPL's stock price.

The current AAPL P/E ratio is 30+. In order for AAPL's stock to move higher, the earning needs to grow much more than 30% per year. Do you believe that it can consistently beat that expectation over the next few years?

KlangFool

I do not but if you have to pay attention to the gross margin story and FCF. Not to mention with cash neutrality they're destined to continue either buybacks or dividend increases. Whether this is a healthy response can be argued.
Lastly, in speculative nature, I believe the innovation pipeline will be strong counter to naysayers.

[Commoner]

Thanks. wrt to VOO I was thinking similarly but VTI. With a potential volatile market, DCA over the next year. Maybe best to lump sum though. If I DCA then if I capture any losses, I can TLH with VOO.

I personally DCA all large investments. The longest I would DCA in a situation like this is six months though. You really want to avoid selling Apple, setting money aside to buy VOO/VTI, and then failing to follow through with DCA purchases in the later months.

The main goal is to get your money to work for you through investments. Make sure you have a plan and you stick to it.

[cjcerny]

Thanks...my cost basis is low so looking at about 1.1m capital gains on that 1.5m. Could I stomach a downturn.of 50%? Probably, but assuming if I went to an index I could experience the same in a recession. I believe it would recover. On the flip side, could I stomach VTI going up 50% in years while AAPL goes 100%? That would sting.

To your other question, I want out of stocks longer term and plan to simplify for retirement purposes and quality of life. Going with the volatility of these mag 7 is stressful at times, but I've been very lucky.

You are risking way more than a 50% downturn with that portfolio. Apple could indeed continue to be a great ride for you, but people used to think that about Kodak, too. I’m glad you’re asking about diversity, but I don’t see you doing it until something happens that really hurts, and really hurts can be really tough to recover from often times. Hopefully, your spouse is pushing for diversification, because they stand a better chance of getting you to do it than anything anyone on this forum is going to say will.

As far as getting there goes, it isn’t difficult. Divert all new purchases to an index fund. Sell the Apple hoard little by little as opportunities arise and keep your fingers crossed until you are done selling. There’s never a good time to sell when you have that kind of income and all those capital gains, but that’s small change when you’re facing a small but not zero chance of losing it all.

[indexin99]

You are risking way more than a 50% downturn with that portfolio. Apple could indeed continue to be a great ride for you, but people used to think that about Kodak, too.

Thanks for your thoughts. Agree I have a lot of risk here! A draw down would hurt but I'd hopefully hold it back to break even if lucky. All respect, I don't think AAPL is Kodak, IBM, Sony or Nokia. I think geopolitical risk / China are the key threats.

[KlangFool]

I am in a position where I am confident in AAPL's future,

indexin99.

But, that may not have anything with the future of AAPL's stock price.

The current AAPL P/E ratio is 30+. In order for AAPL's stock to move higher, the earning needs to grow much more than 30% per year. Do you believe that it can consistently beat that expectation over the next few years?

KlangFool

I do not but if you have to pay attention to the gross margin story and FCF. Not to mention with cash neutrality they're destined to continue either buybacks or dividend increases. Whether this is a healthy response can be argued.
Lastly, in speculative nature, I believe the innovation pipeline will be strong counter to naysayers.

indexin99,

In order for the AAPL stock price to go higher, it has to beat expectation.

"I do not but if you have to pay attention to the gross margin story and FCF. Not to mention with cash neutrality they're destined to continue either buybacks or dividend increases."

This has been priced into the current AAPL stock price. So, in order for AAPL to go higher, it has to do better than whatever everyone known so far.

"Lastly, in speculative nature, I believe the innovation pipeline will be strong counter to naysayers."

At P/E ratio of 30X, there are no naysayer out there. It had been priced to perfection.

Good luck to you!

KlangFool

[calmaniac]

OG AAPL investor here, bought my shares on 12 October 1993 at $0.22 a share, when you were about 7 years old (!), see screenshot below (actually it was $22/share at the time with a gazillion stock splits since). As the stock value has increased over the past 10-15 years, I've incrementally sold off chunks of my AAPL and diversified into index funds. Indeed, I sold 10% of my AAPL and MSFT holdings this afternoon!

High flyer companies don't stay that way forever. At least they have not in the past. Do you really think this time is different?

It may not be of much use to you right now, but one way to unwind is to take advantage of severe market downturns, think March 2020 or October 2022, to sell assets in brokerage account at a loss, and use those losses against the AAPL capital gains. I was able to take 6 figure losses of recently purchased ETFs during the above downturns. Also, sell those stock lots with the highest cost basis first (lowest gains).

Lastly, for investing I think it best to rely on data rather than "belief". Are you reading books on investing? William Berstein's recently updated 4 Pillars of Investing is excellent. As is Burton Malkiel's Random Walk down Wall Street. Reading a bunch of internet stuff is not a substitute for books. You are investing real money, so you need to invest the time.

I believe it would recover.

Lastly, in speculative nature, I believe the innovation pipeline will be strong counter to naysayers.

That said, when I was your age I did far worse investing than hanging on to a large profitable stock like AAPL. Maybe commit to selling half of your holdings over the next few years?

Lastly, congratulations on your early investing success and good luck in the future!

[indexin99]

This has been priced into the current AAPL stock price. So, in order for AAPL to go higher, it has to do better than whatever everyone known so far.

At P/E ratio of 30X, there are no naysayer out there. It had been priced to perfection.

All good points here. Assuming there is a clear correlation between technicals and stock price, that is theoretically correct. Perception of future value can shift without having executed yet. Take AI for example.

[indexin99]

High flyer companies don't stay that way forever. At least they have not in the past. Do you really think this time is different?

To be honest, I don't know. Nobody does.... Forever in this context for me is a few decades id hold at most. I'd love to pass AAPL to my kids but even better, some of a diversified portfolio. Thanks for the helpful thoughts.

[KlangFool]

This has been priced into the current AAPL stock price. So, in order for AAPL to go higher, it has to do better than whatever everyone known so far.

At P/E ratio of 30X, there are no naysayer out there. It had been priced to perfection.

All good points here. Assuming there is a clear correlation between technicals and stock price, that is theoretically correct. Perception of future value can shift without having executed yet. Take AI for example.

indexin99,

That works when you are not a company worth 3 trillions. AAPL have been priced to perfection... AI is probably factored into that assumption too. So, you need something much more than that.

KlangFool

[Adam11]

There’s a lot to think about since you have many options. To start, you’re firmly in NIIT territory due to your W-2 income so it’ll cost you 18.8% in tax for every dollar of long-term capital gain that you realize. You could unwind over half of your $AAPL position by January over two tax years since the 15% LTCG bracket goes all the way up to $553,850 for MFJ in 2023 and $583,750 in 2024.

If you plan on working into your 50s and beyond you’ll be wrangling with this decision perennially, and you did mention sleeping well at night. If you’re planning an early-ish retirement, dialing it back at work, or an even a sabbatical for a few years, then more options are possible. To me it seems like an all-or-nothing solution: Either realize the gains as cheaply as possible now and spread the risk with VTI, or risk holding $AAPL forever and letting your heirs receive whatever stepped-up basis there may be. The “lottery” comment up above was a really good one; lottery winners pay 40%+ in taxes on their winnings, meanwhile your investing diligence is gonna let you escape at only 18.8%. Lastly, it’s a good problem to have and you’ve only gotta get rich once. Also…death and taxes. And congrats!

[KlangFool]

OP,

Which one will affect you more financially?

A) 1.2M AAPL drop to 600K

B) 1.2M AAPL goes up to 2.4M

KlangFool

[indexin99]

OP,

Which one will affect you more financially?

A) 1.2M AAPL drop to 600K

B) 1.2M AAPL goes up to 2.4M

KlangFool

Definitely A hurts, assuming it doesn't recover

[indexin99]

There’s a lot to think about since you have many options. To start, you’re firmly in NIIT territory due to your W-2 income so it’ll cost you 18.8% in tax for every dollar of long-term capital gain that you realize. You could unwind over half of your $AAPL position by January over two tax years since the 15% LTCG bracket goes all the way up to $553,850 for MFJ in 2023 and $583,750 in 2024.

Dumb question on the LTCG...but my understanding was the $553,850 is only inclusive of W2 gross income. Whether I sold half in 2023 or split in 2023/2024 shouldn't change my bracket, right?

[Adam11]

There’s a lot to think about since you have many options. To start, you’re firmly in NIIT territory due to your W-2 income so it’ll cost you 18.8% in tax for every dollar of long-term capital gain that you realize. You could unwind over half of your $AAPL position by January over two tax years since the 15% LTCG bracket goes all the way up to $553,850 for MFJ in 2023 and $583,750 in 2024.

Dumb question on the LTCG...but my understanding was the $553,850 is only inclusive of W2 gross income. Whether I sold half in 2023 or split in 2023/2024 shouldn't change my bracket, right?

Realizing gains won’t change the 24% bracket you’re currently in for your $300k in W-2 “ordinary income”. But the LTCG brackets are determined by your taxable income (link below). Taxable income on your 1040, Line 15 includes all your income (wages, interest, dividends, gains, etc.) minus your standard or itemized deduction. Consider it a fun math problem.
https://www.cnbc.com/amp/2023/11/14/how ... taxes.html

[Gennaro Dillinger]

I have the same problem with Tesla. It's about 7% of my portfolio and I am not comfortable with it. I'd rather sell it and put it all in VTI but it's mostly LTCG. I'm also doing hefty Roth conversions now so doing anything about it for now has taken a back seat. I don't like it but I can live with it for a while. Just trying to make the best of a given situation. It's a champagne problem.

I would stop auto-reinvesting in Apple if you are doing that.

Best of luck

[calmaniac]

Dumb question on the LTCG...but my understanding was the $553,850 is only inclusive of W2 gross income. Whether I sold half in 2023 or split in 2023/2024 shouldn't change my bracket, right?

No. It will change your capital gains bracket. Definitely want to avoid the 20% capital gains bracket if at all possible. Very cool Sankey graph below to visualize.

Engaging Data
Understanding Tax Brackets: Interactive Income Tax Visualization and Calculator
https://engaging-data.com/tax-brackets/ ... 50&yr=2023

[indexin99]

Dumb question on the LTCG...but my understanding was the $553,850 is only inclusive of W2 gross income. Whether I sold half in 2023 or split in 2023/2024 shouldn't change my bracket, right?

No. It will change your capital gains bracket. Definitely want to avoid the 20% capital gains bracket if at all possible. Very cool Sankey graph below to visualize.

Engaging Data
Understanding Tax Brackets: Interactive Income Tax Visualization and Calculator
https://engaging-data.com/tax-brackets/ ... 50&yr=2023

Very helpful, thanks. I can just plug in my planned LTCG from sale and figure out how to stay under 15%

[randomguy]

OP,

Which one will affect you more financially?

A) 1.2M AAPL drop to 600K

B) 1.2M AAPL goes up to 2.4M

KlangFool

Definitely A hurts, assuming it doesn't recover

Microsoft dropped 50% and took about 15 years to recover. During that time period, business was pretty good. Intel dropped 75% and has never recovered. Again bussines has been pretty decent the past 20 years. We aren't talking about companies that pulled a RIMM/Enron and gone to basically zero.

You have to decide how much risk you are willing to take and how greedy to be. Obviously apple can double again. Or start a long spiral down to zero. Or just average performance. Personally I would be in the sell 100-200k/year until I get to a place I like. If the stock doubles and I end up with 2 million instead of 2.6, I will live... If it drops, I will be sad and still live...

[Grt2bOutdoors]

I am in a position where I am confident in AAPL's future,

indexin99.

But, that may not have anything with the future of AAPL's stock price.

The current AAPL P/E ratio is 30+. In order for AAPL's stock to move higher, the earning needs to grow much more than 30% per year. Do you believe that it can consistently beat that expectation over the next few years?

KlangFool

I do not but if you have to pay attention to the gross margin story and FCF. Not to mention with cash neutrality they're destined to continue either buybacks or dividend increases. Whether this is a healthy response can be argued.
Lastly, in speculative nature, I believe the innovation pipeline will be strong counter to naysayers.

This response indicates you are not ready to sell. Number one rule in investing in single company shares - don’t let your emotions get in the way of making rational decisions. Have you had a sit down meeting with your spouse? Tell your spouse you have 75% of household assets in two companies and ask her how comfortable she feels knowing the family’s fortunes are tied to them. The rational move would be to start reducing your over-reliance on just two companies, but keep in mind by buying VTI or VOO you are still meaningfully exposed to the technology sector so it’s not a complete exit.

[blackbird]

The best time to put your investments on a suitable path for the long term was yesterday. The second best time is today.

Blackbird

[indexin99]

I am in a position where I am confident in AAPL's future,

indexin99.

But, that may not have anything with the future of AAPL's stock price.

The current AAPL P/E ratio is 30+. In order for AAPL's stock to move higher, the earning needs to grow much more than 30% per year. Do you believe that it can consistently beat that expectation over the next few years?

KlangFool

I do not but if you have to pay attention to the gross margin story and FCF. Not to mention with cash neutrality they're destined to continue either buybacks or dividend increases. Whether this is a healthy response can be argued.
Lastly, in speculative nature, I believe the innovation pipeline will be strong counter to naysayers.

This response indicates you are not ready to sell. Number one rule in investing in single company shares - don’t let your emotions get in the way of making rational decisions. Have you had a sit down meeting with your spouse? Tell your spouse you have 75% of household assets in two companies and ask her how comfortable she feels knowing the family’s fortunes are tied to them. The rational move would be to start reducing your over-reliance on just two companies, but keep in mind by buying VTI or VOO you are still meaningfully exposed to the technology sector so it’s not a complete exit.

Good points. My wife takes the "I am not knowledgeable on investments" response. Noticed no mention of international etfs in many responses. For this distribution, it would be responsible to have 20-30 VXUS as well. Could argue that I have enough exposure in my 401k which I'll be maxing out for many years.

[indexin99]

OP,

Which one will affect you more financially?

A) 1.2M AAPL drop to 600K

B) 1.2M AAPL goes up to 2.4M

KlangFool

Definitely A hurts, assuming it doesn't recover

Microsoft dropped 50% and took about 15 years to recover. During that time period, business was pretty good. Intel dropped 75% and has never recovered. Again bussines has been pretty decent the past 20 years. We aren't talking about companies that pulled a RIMM/Enron and gone to basically zero.

You have to decide how much risk you are willing to take and how greedy to be. Obviously apple can double again. Or start a long spiral down to zero. Or just average performance. Personally I would be in the sell 100-200k/year until I get to a place I like. If the stock doubles and I end up with 2 million instead of 2.6, I will live... If it drops, I will be sad and still live...

Oh yeah..the Balmer era. Bad side of that example is that it recovered very well over the next 23 years. What makes this even harder is I started a plan to sell when the stock was 70% lower and ditched it when I liked the stock trends.

[Wiggums]

Are you falling into the “I want diversification, but I want Apple growth too” trap?

Most people would encourage you to diversify. Especially if you are considering early retirement.

[cbs2002]

Without sounding like an old codger (I hope) - the last 100 years are littered with large companies who had investors who said the same things over and over. "This time it's different." No one knows where AAPL will be in 10, 20 or 50 years. You don't, I don't.

Congratulations on your good fortune. Your portfolio is now extremely risky. I could not live with it.

You talk about passing down AAPL to your children, so it sounds like providing for heirs is one of our goals. Why not focus on handing down money to your children rather than handing down AAPL?

Your portfolio is about $2.2MM. You make $300K. Can you save $100K/year for the next decade? More? This gives you a reasonable chance at ending up with a $5MM portfolio in 10-15 years. Is that enough? What other goals do you have?

I'd recommend slowly selling up to the top of your current tax bracket until no single stock is more than 5% of your portfolio. Every time I sold I would buy VOO or something similar. Keep some AAPL and GOOGL if it makes you feel good, but know you also are holding large amounts of those stocks if you own VOO. Depending on how close you are to retirement, I'd also be looking at some short- and med-term bond funds, but people have varying opinions on this as they do about international.

With the Bogleheads approach, you will always do worse than the top performing individual companies.I'm OK with beating most companies most of the time, just not all of them. Whether you are OK with that is up to you.

[BrooklynInvest]

As others have said, I'd slowly reduce my Apple by half over time. Probably over a long time. That would be my opinion regardless of what stock it is.

A former employer's (excellent) stock grew to nearly 15% of my portfolio. That was too much for me. 10 seemed about right. My son can have it if all goes according to plan.

I'd also direct index with new contributions from this point on, removing your large positions from that mix so you're not adding to the issue on the other side. That could also help you pair losses with gains from your big winners over time.

Well done OP!