Author Topic: What to do with windfall investment portoflio  (Read 371 times)

frugalbackpacker

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What to do with windfall investment portoflio
« on: November 01, 2018, 12:13:52 PM »
Hello,

I've been reading the site for awhile but this is my first post here. Thanks for all the great information. I am hoping for a little guidance on what to do with a windfall my wife received when her grandmother passed away. She inherited about 270,00 in assets, in a combination of cash, equities and mutual funds in a managed account (we inherited the financial advisor as well, who also manages my wife's parents' account). Her grandmother passed in '07, but she wasn't able to gain access to the account until 28, which was three years ago. Of the 270K in assets, 120k was in cash, and our advisor recommended we invest a portion of the cash in variety of tech stocks and international mutual funds, which we have (after reading this site for a while, I probably should have just invested that in index funds...). Since then, our total assets are worth 339K. We still have 60k in cash, which we are in a position to invest. We held on to this cash as we both were out of jobs for roughly two years traveling and wanted it as a back-up stash. We both are working again and have an ample emergency fund separate from this 60K.

I'm just looking for some advice on what to do - I understand there would be some large tax penalties if we sell the individual equities and invest in index funds (if that even makes sense). Below are my current holdings - what would you do with it?

Cash - 64,926

Equities -  104,224   
Altria         4,221
Apple               21,445
Comcast       3,682
DTE Energy    25,209
Facebook       19,735
Ford               4,060
Kraft               881
Mondelez       2,062
Pfizer               9,254
Philip Morris   5,707
Travelers       648
Verizon       7,314
   
Mutual Funds -    170,147
AMEFX (American Income Fund)           9,360
NPFCX (American New)                   38,207
ANFCX (American New Economy)           25,175
BALCX (American Balanced)           37,573
MITIX (MFS Massachusetts)                   30,789
MIGYX (Oppenheimer Main Street)   29,040
   
   
   
Total   339297

RWD

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Re: What to do with windfall investment portoflio
« Reply #1 on: November 01, 2018, 12:29:16 PM »
You may be able to do some tax loss harvesting. I personally would recommend switching to index funds as much as you can, considering any tax consequences.

JL Collins has an article about dealing with individual stocks:
https://jlcollinsnh.com/2018/06/28/stocks-part-xxxiv-how-to-unload-your-unwanted-stocks-and-funds/

The whole stock series is definitely worth a read:
https://jlcollinsnh.com/stock-series/

Once you decide on an investment plan, write it down:
https://www.bogleheads.org/wiki/Investment_policy_statement

BiggerFishToFI

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Re: What to do with windfall investment portoflio
« Reply #2 on: November 01, 2018, 12:40:55 PM »
Personally, I would look into firing your financial advisor and transferring all of the assets to Vanguard, Fidelity, Schwab or some other low-cost broad-based index fund provider. Your advisor will not be happy as he is collecting 12b-1 fees from the funds. It is not wise financially to stick with the advisor because of the "relationship" they have with your in-laws or you do not want to hurt their feelings.

The mutual funds you have listed have high fees, on 170k you are likely paying 1.3k-3k or more per year, and more every year that the funds grow.

fatcow240

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Re: What to do with windfall investment portoflio
« Reply #3 on: November 01, 2018, 01:04:06 PM »
Personally, I would look into firing your financial advisor and transferring all of the assets to Vanguard...
Agreed.  You can at least not use your advisor for all of your funds.

Are you maxing out your taxed advantaged accounts.  401k, HSA, IRA.  If you are not, you may consider this.  You use the cash, dividends, or sell to fund your tax advantaged accounts.

What is your cost basis for each stock and fund?  What is expected tax bracket?  You could sell off a little each year to get out of individual stocks and high price funds, while managing the tax impact.  If they are in long term capital gains rate, you could owe little to no taxes on them depending on your bracket.

BicycleB

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Re: What to do with windfall investment portoflio
« Reply #4 on: November 01, 2018, 03:47:21 PM »
This is a golden opportunity to take control of your taxes. By using IRAs and whatever investments are available through your work, such as 401k plans, you can minimize your taxes anyway. Learn the tax bracket you're in and the retirement accounts available to you from your job. If your bracket is low enough, you can avoid paying capital gains tax you would otherwise be liable for.

Google "capital gains tax rate" and in the US, you'll probably find a table explaining that you don't have to pay capital gains tax rate at certain income levels (example article: https://www.nerdwallet.com/blog/taxes/capital-gains-tax-rates/ ).  Gather the info that fatcow240 asked about. Then, if in doubt, post a more detailed case/question in the tax area to consider the tax consequences of selling, and to game out how to most efficiently avoid tax. You'll probably find you're flexible enough to efficiently transfer into Vanguard over time without paying any tax.

If you make too much for that, you'll have a good life anyway. Unless you've become a spendypants now that you're off the backpacking trail. ;)
« Last Edit: November 01, 2018, 03:48:56 PM by BicycleB »

Financial.Velociraptor

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Re: What to do with windfall investment portoflio
« Reply #5 on: November 01, 2018, 04:56:44 PM »
If you need to convert in stages by year for tax purposes, liquidate the mutual funds first. 

The fact you have to ask suggests to me you should be moving towards a 100% indexing solution.  "Managing" a portfolio is not for you at this time.  Vanguard and Fidelty both have great options.  Do some reading and give some though to a bond allocation...