Author Topic: What to do with individuals stocks?  (Read 532 times)

AD700

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What to do with individuals stocks?
« on: June 11, 2018, 07:18:12 AM »
Hi everyone,

I have a dilemma that Id like to get your thoughts on.

Part of my portfolio is in individual stocks. I know, I know naughty me. These are the legacy of a different time in my life before I became convinced of the value of index funds. I now have a portfolio mostly made up of index funds, and all future investments will be in index funds but I still hold a reasonable value in these individual stocks. 

I could, of course, just sell up and throw the money into index funds. However, that would be breaking with the strategy according to which the stocks were originally purchased, and according to that strategy it is not the right time to sell.
All are in plus except for one, and most are within a range of 10-20%. With the top performer at 65%. Dividends are on top of this.

Two stocks, in particular, are too early to sell. They were bought with a specific time horizon in mind and to bail now would seem premature. I could sell the others, but then I may inadvertently skew my portfolio towards the low-performers and miss out on further gains from the winners.
 
What would you do? Any smart ideas?

RWD

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Re: What to do with individuals stocks?
« Reply #1 on: June 11, 2018, 07:58:54 AM »
I could, of course, just sell up and throw the money into index funds. However, that would be breaking with the strategy according to which the stocks were originally purchased, and according to that strategy it is not the right time to sell.

What does your current investment policy statement say? Why don't you follow that?

MrsWolfeRN

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Re: What to do with individuals stocks?
« Reply #2 on: June 11, 2018, 09:30:15 AM »
What is your marginal tax rate? If it is higher now than it will be in the future, just keep them. JL Collins calls these kinds of things "cats and dogs", and suggests using them up first when you get to the withdrawal phase, or even treating them as an emergency fund along the way.

desert_phoenix

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Re: What to do with individuals stocks?
« Reply #3 on: June 11, 2018, 10:39:40 AM »
You could potentially hold them until they drop and sell out of each individual stock if/when you'd be able to tax loss harvest.  I am unsure how difficult that would be if you were looking to move them from single stock to an index fund.

L.A.S.

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Re: What to do with individuals stocks?
« Reply #4 on: June 11, 2018, 10:45:31 AM »
You could ignore it for a while and just start indexing.  And then once you've had a chance to mull it over figure out what to do with them.

One thing to consider is that when you sell a stock at a gain in a taxable brokerage account, you will owe capital gains tax on the gain.  One way to avoid this with long-term held securities is to donate them directly to a charity without selling them.  One would avoid the tax and also be allowed to claim the full fair market value as a charitable contribution for income tax purposes.  Although, this only really matters if one itemizes, which many people no longer do due the the next tax law and the higher standard deduction.

Chrissy

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Re: What to do with individuals stocks?
« Reply #5 on: June 11, 2018, 02:32:14 PM »
Let 'em ride.  Sell when your original strategy plays out.  If you see the experiment through to the end, then whatever lesson you take from it will stick with you better. 

We have a few individual stocks, ourselves, though the vast majority of our portfolio is in FSTVX.  We started two years ago, and our strategy says, "Wait at least 10 years."  Only eight more years to go!  (We're beating the market thus far.)

One

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Re: What to do with individuals stocks?
« Reply #6 on: June 11, 2018, 03:01:43 PM »
if in taxable account would let em ride, 1 superstar could make up for 9 total failures. Reinvest dividends in voo 

KBecks

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Re: What to do with individuals stocks?
« Reply #7 on: June 11, 2018, 03:08:01 PM »
What stocks are you holding, and are they in a taxable account or a retirement account?

I would just put new money into an index fund and let the stocks ride if you are not comfortable selling them at this time.

talltexan

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Re: What to do with individuals stocks?
« Reply #8 on: June 12, 2018, 09:51:46 AM »
Suppose you have six individual stocks you don't want to sell, but you know that selling some and putting the money in index funds will be better, long term. Two ideas for mental tricks to get you unstuck:

1. roll a dice, then sell the one stock the dice picks, putting that money into VTI. You can keep the other five until next tax year.
2. Unwind a position into the equivalent options contract. Now, you have the upside in the short term (in case you wrongly sell a position too early), but only a fraction of the downside, plus missing out on some minor dividend action. I recently sold 100 shares of Kinder Morgan and replaced with August-expiration options for the same number of shares. This may not have been wise since they're hiking their dividend, but at least that higher dividend should boost the share price in the short term.

panda

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Re: What to do with individuals stocks?
« Reply #9 on: June 12, 2018, 10:07:21 AM »
I'm in a similar position with a mix of stocks purchased before and at the bottom of the 2008 Recession. The ones at the bottom of the recession were bought with a long-term "buy and hold" strategy and have been doing quite well (ex., V, AMEX) while a lot of the ones bought before the recession have been doing mediocre at best.

Over the years I've sold negatively performing stocks to tax-loss harvest. The remainder I've just been holding on to and keeping an eye on to see how they do. Since the money was already invested and the stocks selected on the basis of a "buy and hold" strategy there isn't any point in selling them off just because my investment strategy has changed to predominately index funds.