Shares diversity question (Australia)

[nnls]

I currently get a good deal on shares through my work (for every share you buy you get one free 3 years later) I buy the maximum I can get which now means 79% of my shares are in my company, with the other mix being VAS/VGE/VGS. I am buying additional vanguard shares every few months

Everyone at work tells me not to sell my work shares (due to capital gains tax I currently earn over $130k a year) and just hold on to them until I have a year that I earn less money. But I feel like I shouldn't have all my eggs in one basket so to speak.

Do you think its worth selling them and using the money to buy more vanguard or just hold on to them? 

[deborah]

Your portfolio is more diversified than mine was when I was your age. I may have been 100% in my company!

It served me well, and my shares went up between 50% and 100% between when I bought them, and a few years later, when I sold them. But I was lucky. If I had waited another five years, they would have been worth between half and a third of what I bought them for. I suspect that you’re in the same boat. Look at the spread in share price, including the 80s and 90s for your particular company, and I expect you’ll see the same thing. The mining industry has a very volatile share price.

I left at the right time (the way it worked was that shares had an interest free 10 year loan, that was paid back with the dividends, so I sold some to keep some). Later (when the share price was really low), the company sold off the section I had worked in. People I had worked with owed more than the shares were worth, and it went really badly for them, because they had to pay back the loan as they were no longer part of the company.

Long story short, I’d sell.

[nnls]

Thanks Deborah, I feel like I should sell them and just pay the tax but everyone here at work tells me not to, so its hard with so many people saying to do the opposite

[deborah]

A lot of people suggest that you have 10% of your portfolio as “play money” that you’re not upset about losing, but could make good gains with. If your company holding was only that much of your portfolio, I wouldn’t make the same recommendation.

If you were retiring in the near future, and your company wasn’t very volatile, I’d possibly suggest waiting, so your capital gains tax is lower. But I’m concerned that we’re in for a downturn, and mining and other manufacturing materials are always the first shares to suffer. As you’re keeping them for more than a year, your tax would be halved anyway.

Also, if you were planning to keep the shares forever, it wouldn’t matter how volatile they are.

[mrmoonymartian]

At the very least I'd sell the 50k per year that keeps you in the 40.5% tax bracket.

[Fresh Bread]

If you consider the 3 free shares to be a bit of a windfall, it's maybe not so painful to pay tax on any gains on 75%.

I'm thinking that mining stocks are not going to do well in the medium term. Unless you are with a company that is doing v little fossil fuels and mainly metals or something? I don't really know if there is a mining company like that!

If it was me I think I'd sell them.