Author Topic: What to do with individuals stocks?  (Read 1553 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.

Chrissy

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Re: What to do with individuals stocks?
« Reply #4 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 #5 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 #6 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 #7 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 #8 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.

marty998

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Re: What to do with individuals stocks?
« Reply #9 on: June 27, 2018, 03:19:45 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.

@desert_phoenix  can you explain? Why should someone make a loss, sell and invest less in an index fund, as opposed to make a profit, sell, pay tax and reinvest more in the index fund now?


jc4

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Re: What to do with individuals stocks?
« Reply #10 on: July 06, 2018, 10:40:14 AM »
You said it yourself. Selling at a profit means PAYING TZX now. If you sell at a loss you get a discount on taxes.

It's all a timing game though. You pay less taxes now, and more later. That ends up advantageous for most people.

Car Jack

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Re: What to do with individuals stocks?
« Reply #11 on: July 06, 2018, 11:12:17 AM »
What *I* would do:  Sell everything right now.  Do the record keeping to pay taxes, collect all the money and put it into index funds/ETFs like the rest of my portfolio is.

chasesfish

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Re: What to do with individuals stocks?
« Reply #12 on: July 08, 2018, 06:41:20 AM »
I've been in this situation for a while with my regular brokerage account and individual stocks are roughly 16% of my portfolio.  I've taken it down from 30% this time last year and even higher a while back.

The lesson I've learned, when its time to sell, you need to sell.  Don't sell them all in bulk and its fine to hang on to some for years, but if the reason you bought the company has fundamentally changed, then sell.  I "lost" a ton of money hanging on to a dividend aristocrat after their long-term CEO and CFO retired and new management just wasn't cut out for the job.  Missed 2-3 years worth of gains before I finally ate the taxes and sold the company.

There may also be some individual companies that you decide provide a lower return, high dividend, but have a low beta (less volatile than the market) which are worth holding and supporting a withdraw rate.

The thing I have to keep reminding myself, a huge chunk of the S&P 500's return has been Facebook, Amazon, Netflix, Apple, and Google.  So the other 495 on average have "Trailed" the market.  Its what makes individual stock investing so tantalizing, if you get one of these big winners, you win big.  If you don't, you experience small, slow losses defined as earning a return less than the market.

Retire-Canada

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Re: What to do with individuals stocks?
« Reply #13 on: July 08, 2018, 08:17:50 AM »
What would you do? Any smart ideas?

What would I do? I'd sell all the stocks and invest according to my current AA.

If you really can't bring yourself to do that and these investments don't compromise your FIRE plans then keep them and sell whenever you can bring yourself to do it.

ChpBstrd

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Re: What to do with individuals stocks?
« Reply #14 on: July 11, 2018, 09:39:02 PM »
Needed information:

1) How big is each position? A $5k position gets different advice than a $100k position.
2) What is the strategy requiring you to hold them? Are you waiting for the gains to become long-term? Are you waiting for a sector to rotate back into favor or a new technology to take hold? Are you between strategies where strategy A is to hold these individual stocks and strategy B is to invest in indexes?
3) When you say it is "too early" to sell two of your companies, is that an expression of FOMO (fear of missing out) if they go higher? Or are you just saying they seem to have good growth prospects in general (i.e. in my opinion, these companies will outperform their index.)?

I'm actually in the same boat. I bought 100 shares of Salesforce (CRM) a couple years ago when my company started paying a couple thousand per employee to use their no-code super-customizable software ecosystem. But I bought it in a taxable account, so these highly appreciated shares will cost me big taxes unless I hold them until retirement when my income will be lower. So now thousands of dollars are at greater asystemic risk.

jacoavluha

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Re: What to do with individuals stocks?
« Reply #15 on: July 11, 2018, 11:55:56 PM »
I would sell all individual stocks except ones that would result in short term capital gains. If possible I would hold those until the one year mark then sell