Author Topic: What would you do with this stock?  (Read 949 times)

Freddie

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What would you do with this stock?
« on: May 22, 2017, 09:42:43 PM »
Assuming:

- You had stock in a single very-stable, blue-chip company currently worth a total of $165,000;
- The stock paid relatively predictable dividends, of approx. $1,500 per quarter/$500 per month;
- You wanted those shares, in one way or another, to help support your-pre-traditional-retirement-age (i.e., pre-age-60ish) existence  -- that is, to facilitate being able to cut back on work/perhaps go to part-time until traditional retirement age;
- You are open to all possibilities, including, but not limited to, selling all or part of the stock in order to invest in something else (whether it be a business, real estate, other investments, or something else)...

What would you do with the stock?

Thank you.

P.S.  I understand this is not a thorough case study, such that some respondents may say they require more information.

extremedefense

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Re: What would you do with this stock?
« Reply #1 on: May 22, 2017, 10:10:37 PM »
What stock?

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etselec

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Re: What would you do with this stock?
« Reply #2 on: May 22, 2017, 10:47:27 PM »
What would the tax consequences be of selling it? (That is, what tax bracket are you in, and what portion of the $165,000 would be taxed as capital gains?) How much is this $165,000 in the context of the rest of your assets?

If I've done my math right, it's currently throwing off dividends at just over 4%, which is around a safe withdrawal rate for the same money in more standard index funds. But even though the company is quite stable, it's still risky to have so much money in one stock. If I were in your position, and the money was a significant chunk of my portfolio, I'd sell as much as possible without incurring capital gains, and buy into index funds. If you'd incur a lot of capital gains now, and that is likely to change in the near-ish future (e.g. when you retire or drop to part-time work and are in a lower tax bracket), holding onto it for now may not be a bad idea.

Proud Foot

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Re: What would you do with this stock?
« Reply #3 on: May 23, 2017, 09:09:41 AM »
If that is your only investment then I would strongly consider selling most of it and reinvesting in a broad market index fund.  However, it is hard to make any good recommendations without knowing first:

Which type of account is this in? (Taxable, Roth, Traditional IRA)
If in taxable, what would your capital gains be and what would your capital gains tax rate?
What portion of your overall portfolio is this $165,000?
Are you making additional contributions to your portfolio? If so, how often and how much?

If you are adding to your portfolio regularly you could keep the investment and use the dividends to invest in an index fund rather than reinvesting in the original company.