All my Eggs in one basket (AAPL)

[seeyalater]

Hi Everyone. I just recently discovered this forum/blog and so glad I did. I have tons of questions, but I'll start slow.

I'm in my 40s, married with 3 kids. Self Employed making about $120K/year, Wife about $50K. We have about $250K equity in our $550K house with about 12 years left on mortgage @ 3.75%.

About 10 years ago I decided to put all my savings in AAPL and today it's worth about $600K which is freaking amazing. I'm not sure how much longer I want to keep all my eggs in AAPL, but not sure what I should do. Take 50% of it out, pay the 15% tax on that and re-invest in something else? Sell it all? Leave it alone for another 10 years and hope it doubles?

Besides about $175K that I have in a Simple IRA (VFORX), the AAPL money is all we have for savings.

[RWD]

Holy crap that is terrifying...

The AAPL is in a taxable account, not a retirement account? You definitely should start diversifying. I would recommend index funds. They already hold plenty of Apple stock (VTSAX is 2.8% Apple). Selling half this year doesn't sound like a terrible strategy (and maybe the other half next year).

Have you read JL Collins' stock series?
https://jlcollinsnh.com/stock-series/

[bwall]

Congrats on picking a winner!

You got in at about $30/share (split adjusted) and now it's at $200/share. In the meantime you got some fat dividends (re-invested or paid out in cash?) Now you're set to get about $2250 per quarter ($9k/year) for just owning the stock. And the dividend will just keep rising. As AAPL shrinks their float (currently 4.5b shares, down from 6.9b after the 7-to-1 split) and diversifies into more sectors, the money will just keep rolling in. What's not to love?

This is the power of the stock market to make middle class people wealthy. Your money has earned you over $500k (round numbers) in 10 years. That's over four years of your income in 10 years!

However, at some point, it is wise to diversify. Look at Enron, WorldCom, Lucent, GM, Delta, MySpace (Rupert Murdoch squandered $500m buying it), or GE (circling the drain), and you'll see once high-flying companies, slam-dunk investments, that are now no longer anywhere to be found. It's hard to pick winners, so lots of people around here will recommend VTSAX to you.

As you might have guessed, I have both AAPL and VTSAX. Since I have a hard time selling AAPL and buying VTSAX, I still own more AAPL than I do VTSAX. I take my AAPL dividends and invest them in VTSAX as a way to slowly balance the portfolio.

[ysette9]

You are taking on incredible, breath-taking, uncompensated risk. You got lucky. Congrats. But please remember that you are lucky, not smart. In your shoes I would be too scared to sleep at night and would do anything under the sun to sell everything Apple and convert it all to a broad index fund. Personally we are in a 60/40 mix of VTSAX and VTIAX (Total stock market and total international stock market).

[KBecks]

Way to go on your AAPL shares.

Put your new money into another investment.  I think diversifying is good, but AAPL is still a great company, so don't feel like you have to rush out of it. I would aim to get at least half of it into something else over time.

Karen

[bwall]

You are taking on incredible, breath-taking, uncompensated risk. You got lucky.

Uncompensated? Really? He's up 7x his original investment in 10 years. That sounds like great compensation to me. If I were in his shoes my only regret would be not investing more, or else not investing the same amount another 10 years prior.

If you'd invested in the Dow at it's all time low this century, March 3, 2009, (6500 points), then the Dow would have to be well over 40,000 points to match his returns (now its around 25,000 to 26,000). So, not only has he been very well compensated for his risk, he's beaten the market!

[nereo]

Reminds me of a parable:

Man hears about a company and thinks it could be worth a fortune some day, so he invests half his savings.  The company's stock goes through the roof and he uses the some of the proceeds to pay for his children's tuition, all the while thinking: "how smart am I!?". Then he hears about another company and invests the rest.  The company goes bankrupt, and he thinks "how unlucky am I!?"

[MrSpendy]

I would go online and order a used copy of CFA level III textbooks and look up “hedging a concentrated stock position” in the private wealth management section.

I’d then learn the very basics of options strategies.

I’d then learn the tax law regarding “constructive sale”. This is key to your hedging strategy.

Then i’d implement the above to remove tha vast majority of your single name risk in apple and swap the risk into index ETF’s without selling the AAPL stock and realizing taxes.

It should take you a weekend and is more complex than selling, but your deferred gain is large enough that you could save some real dough. AAPL is super liquid and has a robust options market, so this should be easy to implement.

Just think of yourself as an AAPL executive who can’t sell stock, but doesn’t want to own the downside risk and upside in only one company.this is a common occurrence and many strategies exist to take care of it. Goldman Sachs and the like will charge you an arm and a leg to implement t for you, but be mustachian and DIY.

Congratulations on your awesome investment.

[RWTL]

That's an awesome success story.  As others have mentioned, it is terrifying to me to be in a single stock.

Personally, I would diversify between S&P 500 index and bond funds.  You could keep some of the Apple stock as as a smaller portion as well.

[ysette9]

You are taking on incredible, breath-taking, uncompensated risk. You got lucky.

Uncompensated? Really? He's up 7x his original investment in 10 years. That sounds like great compensation to me. If I were in his shoes my only regret would be not investing more, or else not investing the same amount another 10 years prior.

If you'd invested in the Dow at it's all time low this century, March 3, 2009, (6500 points), then the Dow would have to be well over 40,000 points to match his returns (now its around 25,000 to 26,000). So, not only has he been very well compensated for his risk, he's beaten the market!

We agree that he got lucky. I mean the textbook definition of uncompensated risk when it comes to investing.
https://en.m.wikipedia.org/wiki/Uncompensated_risk


“, if you owned only an individual stock or only a single market sector you would have significant uncompensated risk. By investing in one stock or one single market sector, you are not compensated for that extra risk (since that risk can be diversified away by owning the Total Stock Market). You should expect to get the same return as the market, but you have a lot more risk in your portfolio.

The efficient market hypothesis states that you are not rewarded for taking uncompensated risk.”


Investing in stocks versus bonds is taking more risk and therefore we expect (and with a broad index fund receive) higher return for that risk. With a single stock you are taking on magnitudes more risk without an average expected return that is greater than a broad stock market index. The standard deviation is much higher. You could get very lucky as this OP has been and you could also have your entire investment be wiped out, as has happened with examples already mentioned in this thread.

[Radagast]

You are taking on incredible, breath-taking, uncompensated risk. You got lucky.

Uncompensated? Really? He's up 7x his original investment in 10 years. That sounds like great compensation to me. If I were in his shoes my only regret would be not investing more, or else not investing the same amount another 10 years prior.

If you'd invested in the Dow at it's all time low this century, March 3, 2009, (6500 points), then the Dow would have to be well over 40,000 points to match his returns (now its around 25,000 to 26,000). So, not only has he been very well compensated for his risk, he's beaten the market!

We agree that he got lucky. I mean the textbook definition of uncompensated risk when it comes to investing.
https://en.m.wikipedia.org/wiki/Uncompensated_risk


“, if you owned only an individual stock or only a single market sector you would have significant uncompensated risk. By investing in one stock or one single market sector, you are not compensated for that extra risk (since that risk can be diversified away by owning the Total Stock Market). You should expect to get the same return as the market, but you have a lot more risk in your portfolio.

The efficient market hypothesis states that you are not rewarded for taking uncompensated risk.”


Investing in stocks versus bonds is taking more risk and therefore we expect (and with a broad index fund receive) higher return for that risk. With a single stock you are taking on magnitudes more risk without an average expected return that is greater than a broad stock market index. The standard deviation is much higher. You could get very lucky as this OP has been and you could also have your entire investment be wiped out, as has happened with examples already mentioned in this thread.

Or in other words, compensated risk can only be known with hindsight!

[ctuser1]

I'd suggest you sell half of this position today, take the Long Term Capital Gains tax hit, and go buy an SP500 fund (VOO) with that at Vanguard.

This will leave half of your "winnings" in a boring investment, and the other half in a massive gamble!!

Every year, hack some bit off the AAPL gravy train and put it into VOO! Do this till AAPL is < 25% of your net worth, less if you want to take more risk.

Traditionalists will chafe at the 25% exposure to a single stock - but I recon that will be required to satisfy your gambling urges, AND it won't kill you to lose that!!

The first year you will take a massive Capital Gains tax hit. However, this is necessary! You are gambling everything on Cook's ability to keep the AAPL's creative juice running. That's a massive gamble on a single something you don't control!!

The tax hit is well worth the risk reduction in going from 100% gambling to a 50/50 mix of gambling/investing!!

The gradual hacking away after that is to reduce risk in a more tax efficient way.

[ysette9]

I live in Apple country and am within walking distance of the spaceship campus right now, as a matter of fact. The sentiment among the folks I talk to who work in consumer hardware (where I work now) is that Apple hasn’t come out with anything truly exciting in some time. Really, since the first iPhone. They have lots of cash and hire lots of people but around here it feels like they are stagnant. I can’t predict stock prices at all, which is why I don’t even try, but if I did, I wouldn’t bet on Apple. Then again, I’m always wrong with stock feelings so maybe that actually means they will do great? Haha

[Saving in Austin]

Seems like 15% of your AAPL winnings will be taxed for Long Term Capital Gains as soon as you move to diversify if it is held in a straight investment account.

[bwall]

You are taking on incredible, breath-taking, uncompensated risk. You got lucky.

Uncompensated? Really? He's up 7x his original investment in 10 years. That sounds like great compensation to me. If I were in his shoes my only regret would be not investing more, or else not investing the same amount another 10 years prior.

If you'd invested in the Dow at it's all time low this century, March 3, 2009, (6500 points), then the Dow would have to be well over 40,000 points to match his returns (now its around 25,000 to 26,000). So, not only has he been very well compensated for his risk, he's beaten the market!

We agree that he got lucky. I mean the textbook definition of uncompensated risk when it comes to investing.
https://en.m.wikipedia.org/wiki/Uncompensated_risk


“, if you owned only an individual stock or only a single market sector you would have significant uncompensated risk. By investing in one stock or one single market sector, you are not compensated for that extra risk (since that risk can be diversified away by owning the Total Stock Market). You should expect to get the same return as the market, but you have a lot more risk in your portfolio.

The efficient market hypothesis states that you are not rewarded for taking uncompensated risk.”


Investing in stocks versus bonds is taking more risk and therefore we expect (and with a broad index fund receive) higher return for that risk. With a single stock you are taking on magnitudes more risk without an average expected return that is greater than a broad stock market index. The standard deviation is much higher. You could get very lucky as this OP has been and you could also have your entire investment be wiped out, as has happened with examples already mentioned in this thread.

Thanks for the thoughtful reply and link. In the link you provided, uncompensated risk is defined as:
"Uncompensated risk is the level of additional risk for which no additional returns are generated and when taking systematic withdrawals make the probability of failure unacceptably high."

If we run the numbers, we see that AAPL beat the market and thus did provide additional returns. I don't believe that the systematic withdrawals clause applies either, but dunno, maybe it does. So as I see it, his investment example does not meet the threshold of compensated risk since additional returns were indeed generated.

Maybe the term is an academic one that by definition applies to any concentrated position. Dunno. But, it still seems like the OP has done very well for himself and now has a very high quality problem to solve.

[bwall]

I would go online and order a used copy of CFA level III textbooks and look up “hedging a concentrated stock position” in the private wealth management section.

I’d then learn the very basics of options strategies.

I’d then learn the tax law regarding “constructive sale”. This is key to your hedging strategy.

Then i’d implement the above to remove tha vast majority of your single name risk in apple and swap the risk into index ETF’s without selling the AAPL stock and realizing taxes.

It should take you a weekend and is more complex than selling, but your deferred gain is large enough that you could save some real dough. AAPL is super liquid and has a robust options market, so this should be easy to implement.

Just think of yourself as an AAPL executive who can’t sell stock, but doesn’t want to own the downside risk and upside in only one company.this is a common occurrence and many strategies exist to take care of it. Goldman Sachs and the like will charge you an arm and a leg to implement t for you, but be mustachian and DIY.

Congratulations on your awesome investment.

This is great information. Thank you for your thoughtful reply. Even though I'm not the OP, I will do this.

[ctuser1]

I would go online and order a used copy of CFA level III textbooks and look up “hedging a concentrated stock position” in the private wealth management section.

I’d then learn the very basics of options strategies.

I’d then learn the tax law regarding “constructive sale”. This is key to your hedging strategy.

Then i’d implement the above to remove tha vast majority of your single name risk in apple and swap the risk into index ETF’s without selling the AAPL stock and realizing taxes.

It should take you a weekend and is more complex than selling, but your deferred gain is large enough that you could save some real dough. AAPL is super liquid and has a robust options market, so this should be easy to implement.

Just think of yourself as an AAPL executive who can’t sell stock, but doesn’t want to own the downside risk and upside in only one company.this is a common occurrence and many strategies exist to take care of it. Goldman Sachs and the like will charge you an arm and a leg to implement t for you, but be mustachian and DIY.

Congratulations on your awesome investment.

I'm curious. I have a $100k position in which I am tax locked myself!

This strategy requires access to long duration options (sell using put/call pairs) or swaps. Are they really accessible for mom and pop investors?

For options, you only have LEAPs, which go out - maybe - up to 2-3 years, with decreasing liquidity the further you go out. So if you were to ride them you would be paying the decay in addition to the high bid/ask spreads.

Are there long term swaps (like AAPL vs SP500) available to the mom and pop investors?

I know institutional investors do this all the time. But they typically use OTC derivatives for this - not exchange traded ones, and they do it for significantly larger positions - not $600k ones.

I'd be curious to learn how to swap out of a relatively small concentrated position as a retail investor.

[BicycleB]

@seeyalater, congrats on your healthy earnings, prosperous marriage, and risky but so far successful AAPL investment. Also on your VFORX investment, which appears to be a nice combination of tax savings from the IRA plus low-ish fees, disciplined management and long term planning.

Would you care to share your annual spending, to help set the context of how close to FIRE you are?

In the absence of spending info, I support that the risk of one stock is high and you should seek to sooner or later diversify instead, even if you keep the AAPL money in other stock investments. MrSpendy's proposal is designed to avoid capital gains tax while accomplishing the diversification goal. I don't know the details well enough to verify that they are foolproof, but it sounds like a good path to explore.

A different, perhaps slower technique for the same goal might be to focus new purchases into a stock index fund, such as VTSAX or VTWAX, and wait for downward movement in the fund. Whenever that happens, you could sell the fund and AAPL in a proportion such that the capital gains tax nets to zero. You can buy the new shares using the "specific identification method" so that each purchase is recorded separately at its own purchase price, maximizing the control you have over when to harvest losses vs gains.

[DK]

Nice. I almost pulled the trigger doing something like this when I had to roll over my 401k when switching jobs about 5 years ago and AAPL's P/E was something stupid like 3 or 4.....I ended being conservative, not doing it, and missing out on a LOT of gains...(and don't get me started on the calculated gamble i was going to take on NFLX which would have had me retired now...) but as far as what to do, since that is basically ALL of your savings, diversification would be a good thing. Index fund would be good, and the main index funds have a decent amount of AAPL anyway, so you'll still be 'in' AAPL. What you probably should do is switch all from AAPL into VTI/VTSAX, some vanguard total index fund....what I would probably do is keep 25-50ish in AAPL, and move the rest into an index fund.

[ysette9]

When I was a kid my father survived many rounds of layoffs at his big company. Other people obviously did not. One of those times his company went through bankruptcy and the stock price plummeted. There were people who were both out of a job and had their 401k decimated because they had all of their savings in company stock.

It is anecdotal but stories abound of why placing all your bets in any one basket is extraordinarily risky. Be clear: OP has been lucky so far but they provided zero guarantee of future performance. Plenty of people where live have long memories of when apple did not do great. I still see Yahoo! license plate holders around; I hope those people got out of company stock before it was too late. Unlike a stock index fund, an individual stock can plummet and never recover. It can go to zero. If it does you have no recourse. If you are okay with that then fine, but let’s be honest and call it what it is: gambling.

[CorpRaider]

If you run through a dynamite factory with a lit match, you might survive, but you're still an idiot.  - Joel Greenblatt

LOL.  Congrats though but yeah I would diversify some.  You could use the dividends to buy other stuff as a start. 

If you're going to FIRE you might have some low income/zero CG rate years in the future to sell some stock. 

[seeyalater]

Wow, was not expecting to login this morning and see this many replies. You guys (and gals) rock!

There was definitely some luck involved with this stock, but I did lots of research and have continued to follow AAPL very closely. I don't see Apple going the IBM way anytime soon. They're sitting on $300B cash and their services and wearables category are growing every day. I also think their content streaming services will do well with more and more people cutting off cable tv.  The $2400 dividend is also nice to pull out every quarter, it's like a little bonus for myself.

I don't think I'm ready to sell all my positions as of yet, but possibly 50% and put into something (Vanguard) that some of you recommended. I was just not looking forward to paying the 15% tax on $300K when I sell. But I'm going to look into what Mr. Spendy and Ctuser1 mentioned and possibly find a way to avoid paying $45K in taxes.

@BicycleB: To be honest, we currently spend almost everything we take home. That's the reason I came to this forum, to get ideas on how to better manage our income/expenses.

[seeyalater]

Woohoo, I'm up $29K today!

[RWD]

Woohoo, I'm up $29K today!

You're still roughly flat (plus dividends) over the last year. SP500 has outperformed AAPL for that period.

[former player]

To be honest, we currently spend almost everything we take home. That's the reason I came to this forum, to get ideas on how to better manage our income/expenses.

ouch, that hurts.

OK, even before you do anything with your Apple stock, you need to look at the Investment Order - https://forum.mrmoneymustache.com/investor-alley/investment-order/ -and make arrangements for you and your wife to put the maximum you can into a low cost index fund in a 401k or equivalent.  You will get an immediate return through the tax efficiencies, and in substantially reducing the cash you see in your bank account hopefully you will make commensurate reductions in all that wasteful spending.

[bwall]

To be honest, we currently spend almost everything we take home. That's the reason I came to this forum, to get ideas on how to better manage our income/expenses.

ouch, that hurts.

Yup.

Being up $29k on the day is great, but what's the point if it's only frittered away later on meaningless junk? There's no end of stuff to waste your money on. Some people have managed to waste hundreds of millions of dollars in a single lifetime and die broke. One famous example is Jesse Livermore. He earned an inflation adjusted billion dollars (!) in the crash of '29 but still managed to die a pauper.

[Blueberries]

Given today's surge, I'd probably take half and invest that in the way you normally would invest your retirement (looks like VOO).  Many view half as a win-win; if it goes higher, you still have half in the market and if it goes lower, at least you took half profits. 

The stock will turn down at some point in the future and when it does, if you haven't taken any profits, the unhappiness you'll feel will surpass any disappointment in not getting the absolute high (which almost never happens).  You'll convince yourself that you'll sell when it hits "x" and if that doesn't happen, you're screwed because your mind will work mental gymnastics in such a way that you'll wish yourself to $0.  Don't get greedy, especially not in a retirement account.

[BicycleB]

@BicycleB: To be honest, we currently spend almost everything we take home. That's the reason I came to this forum, to get ideas on how to better manage our income/expenses.

Wow, that's huge. The spending/investing balance going forward is much more likely to control your future outcomes than the Apple decisions. I think you came to the right place!

[ChpBstrd]

To be honest, we currently spend almost everything we take home. That's the reason I came to this forum, to get ideas on how to better manage our income/expenses.

@MrSpendy offered the most sophisticated answer (thanks!) but given the information above, there is a simpler but more incremental approach you can implement right now and without hiring a tax attorney.

1) Max out 401ks for you and your spouse. That shelters $19k each from taxes (higher if you are over 50). Invest in a diversified way. For 2019, you might have to set your deductions to near 100% of your paycheck to hit these maximums.

2) Sell enough Apple stock each year so that your capital gains are $38k and pay the 15% tax. Use this money for living expenses.

This approach shields $38k of pay from taxes while simultaneously triggering taxes on $38k of capital gains. The net is you would be paying taxes on the same amount of income as you would otherwise, but while redeploying capital toward a more appropriately diversified portfolio.

Of course, this approach would take a very long time to get you to a less risky portfolio. The specters of Nokia and Blackberry would haunt you in the meantime. While you explore @MrSpendy’s suggestions, consider one or both of the following strategies to cut your extreme levels of unsystemic risk:
     -protective puts
     -collars, including costless collars, using options 2-3 years out.

[FIRE4Science]

Let's just all remember that Warren Buffet does not diversify, but he picks stocks after solid fundamental research to help reduce risk that he can control, then he invests heavily into them at great deals and holds for another lifetime.

[RWD]

Let's just all remember that Warren Buffet does not diversify, but he picks stocks after solid fundamental research to help reduce risk that he can control, then he invests heavily into them at great deals and holds for another lifetime.

Investing is Warren Buffett's job. If you have his talent and are willing to invest the time (5-6 hours a day just for reading newspapers and corporate reports...) then by all means you can make that your job too. But for everyone else he recommends index funds.

[nereo]

Let's just all remember that Warren Buffet does not diversify, but he picks stocks after solid fundamental research to help reduce risk that he can control, then he invests heavily into them at great deals and holds for another lifetime.

Warren Buffet is diversified far beyond most individual stockpickers.  Currently his fund (Berkshire Hathaway) is invested in roughly 50 companies across a wide swath of industries, and many of those are multinational congloberates that themselves bring in revenue from a diverse set of products and services.  This is much, much, much different from having more than half your portfolio in a single company.

Yes, as RWD said his (and his sizable staffs') full time job is analyzing companies, but equally important is that he takes on a majority equity ownership for many of these companies, meaning he can has more favorable conditions than us 'normal' investors could ever hope to get buying and selling a few $k (or even a few $MM) at a time.

[UnleashHell]

Let's just all remember that Warren Buffet does not diversify, but he picks stocks after solid fundamental research to help reduce risk that he can control, then he invests heavily into them at great deals and holds for another lifetime.

Warren Buffet is diversified far beyond most individual stockpickers.  Currently his fund (Berkshire Hathaway) is invested in roughly 50 companies across a wide swath of industries, and many of those are multinational congloberates that themselves bring in revenue from a diverse set of products and services.  This is much, much, much different from having more than half your portfolio in a single company.

Yes, as RWD said his (and his sizable staffs') full time job is analyzing companies, but equally important is that he takes on a majority equity ownership for many of these companies, meaning he can has more favorable conditions than us 'normal' investors could ever hope to get buying and selling a few $k (or even a few $MM) at a time.

Even then Warren doesn't always get it right. See dexter shoes  or buying into oil when it was over $100 a barrel.
Better still look what he wasted on Berkshire Hathaway.

[ChpBstrd]

Warren Buffet invested some of Berkshire Hathaway’s money in AAPL, so probably individual investors should weight this one stock at least 82% of their portfolios.

Also, Adolf Hitler was critical of AAPL’s plans to innovate beyond their current product mix, and he was an immoral idiot, so AAPL is probably due to soar.

I just wanted to pull off both the Ad Warren Buffet and the Ad Hitlererium logical fallacies in one post. Mission Accomplished. Internet now even dumber.

[QyQ]

Congrats on this awesome pick 10 years ago. But honestly, I got to say, you have some steel balls having all your eggs in the same basket.

[MaaS]

I'd declare victory and sell a significant portion today. I do think Apple will continue to perform well for the foreseeable future, but the world is unpredictable. A bet of this size (relative to your assets) is crazy for any single investment.

If you do sell, consider taking a tax loss harvesting opportunity in your other investments if one comes along.

[ctuser1]

Apple IS probably the best value pick that is as close to a "sure shot" as you can get in the stock market!! I myself have a huge position from when I used to pick individual stocks almost 9-10 years ago.

Even so, having almost your entire net worth concentrated in it not a good idea at all!! Ideally, no single stock should be more than 5% of your net-worth!!

I have worked with several people from the old Enron who lost their entire networth when that once "sure shot" went down!!

[starguru]

Having all your eggs in one basket is risky.  The least you can do is redirect your dividends to an index fund.

How much of this position is in long term gains?  If it’s not a lot you can sell that portion and diversify.  If it is a lot you can sell 300-400k and diversify.  If I were you I’d be putting 100k in bonds, 100k in foreign index funds, and the rest in us stock index, keeping 100-200k in aapl if you like the company.

You can also sell enough aapl every year to fill up you current tax bracket.

I would definitely start maxing our you retirement plans in index funds.

I think Apple is one of the strongest company out there . They have over a billion active devices and very loyal customers.  They seem to making a strong play into services, and with their large customer base that will do well.  Also they dominate in wearables.

The biggest threat I see is they get broken up by regulators.  That would be devastating.  I wouldn’t want to be all in with Apple if that ever happens.


Sent from my iPhone using Tapatalk

[dragoncar]

I would go online and order a used copy of CFA level III textbooks and look up “hedging a concentrated stock position” in the private wealth management section.

I’d then learn the very basics of options strategies.

I’d then learn the tax law regarding “constructive sale”. This is key to your hedging strategy.

Then i’d implement the above to remove tha vast majority of your single name risk in apple and swap the risk into index ETF’s without selling the AAPL stock and realizing taxes.

It should take you a weekend and is more complex than selling, but your deferred gain is large enough that you could save some real dough. AAPL is super liquid and has a robust options market, so this should be easy to implement.

Just think of yourself as an AAPL executive who can’t sell stock, but doesn’t want to own the downside risk and upside in only one company.this is a common occurrence and many strategies exist to take care of it. Goldman Sachs and the like will charge you an arm and a leg to implement t for you, but be mustachian and DIY.

Congratulations on your awesome investment.

Wow, this is a pro answer.

[J Boogie]

About 10 years ago I decided to put all my savings in AAPL and today it's worth about $600K which is freaking amazing. Leave it alone for another 10 years and hope it doubles?

You picked one of the best 10 year windows to invest in AAPL. You rode the iphone wave. There is nothing on the horizon for AAPL anything like the iphone. Wearables, app margins, and streaming don't have anywhere near the growth potential. The iPhone is their flagship product, conceived by their late founder. I don't think it'll happen again. They will probably do fine, but nowhere near the gains you have seen and nowhere near the gains of the winners of the next decade.

I would conduct research similar to the research you did to choose AAPL in the first place. I am a proponent of high conviction investing. I like Jack Dorsey and SQ, and they are attractively priced right now. I wouldn't invest in Bitcoin, but I am investing in SQ and part of the reason why is that they understand how devoted bitcoin believers are and they will help unlock the potential of bitcoin.

[Car Jack]

Apple has gone down the toilet in the past and will again.  I own some in the form of my total market Mutual funds and ETFs.  Polaroid, GE, Enron, GM, Apple.  It will happen.  They're the trendy darling now, but in a generation, people will laugh to hear that people thought Apple was a future thinking company. 

[chairman5]

About 10 years ago I decided to put all my savings in AAPL and today it's worth about $600K which is freaking amazing. I'm not sure how much longer I want to keep all my eggs in AAPL, but not sure what I should do. Take 50% of it out, pay the 15% tax on that and re-invest in something else? Sell it all? Leave it alone for another 10 years and hope it doubles?

At a price of $210 per share, you have about 2857 shares. 

15% tax on 600k would be 90k.  15% tax on 300k would be 45k.   How about setting a stop loss on half (1428 shares @ 178?) - That's 15% below current price, which you would owe the tax man if you sell here anyway.  Personally I would not sell.  It is ramping up for another run based on services and wearables and given its history, even if we have a downturn or a recession it will likely only sell off the same about or even less than the general market.

[seeyalater]

So many good answers, but it's such a hard decision to even sell half my shares. If I didn't have to pay the 15% tax on profits, I would sell half in a heartbeat and put into something safer. It's also tough to sell when AAPL is doing so well and still has tons of potential.

I researched some of the ideas you guys suggested for not paying tax, but they seemed really complicated. I wonder if my broke (TD), can handle it, even if I had to pay them 5-7% I would still be way ahead.

Decisions....decisions....

[bacchi]

Sell a call option and buy a put option, around 10% out or more. There's some risk and you protect your current gains. Start unloading the position slowly.

[FI45RE]

@BicycleB: To be honest, we currently spend almost everything we take home. That's the reason I came to this forum, to get ideas on how to better manage our income/expenses.

Glad you've come to MMM to figure out your income/expenses. Sorry to rain on the parade here, but, as others have suggested, you really need to spend some time extinguishing the out of control blaze that is your spending. Your family of 5 spends $170k a year? That's 100k more than we spend with the same number of people in the house. Congrats on the lucky stock pick, but yikes, that spending! You might try your luck at posting a case study if you want to do some real work reducing your expenses. It's a great place to start.

[bwall]

So many good answers, but it's such a hard decision to even sell half my shares. If I didn't have to pay the 15% tax on profits, I would sell half in a heartbeat and put into something safer. It's also tough to sell when AAPL is doing so well and still has tons of potential.

This is easily done. Just wait until AAPL falls to the level of your purchase price. Then sell at that price. With no capital gains there will also be no tax to pay. Or, even better, sell below your purchase price so that you will have deductions that you can carry forward!

The capital gains tax isn't a new one, so presumably you knew about this when the investment was made. It shouldn't be a surprise now. Many people might be very envious of this high quality problem to solve.

Some people here have offered potential solutions to help mitigate the tax burden. Take the time to learn how to solve this problem. You will be handsomely rewarded for the time and effort.

[BicycleB]

ETA: Striking earlier post in view of post below. Not sure if you should dig into learning options or not, but if you don't, I'd sell half the AAPL and accept the capital gains tax, use a slower tax efficient strategy to sell the rest, and focus on getting more joy out of less spending.

How much do you earn an hour?

How much would you save by learning to avoid tax while unloading your desired half of the AAPL stock?

Suppose it would take you 80 hours to learn the tax stuff and 20 to implement it. How much would you gain per hour by learning to use these options?

Example:
60/hour (120,000/year divided by 2000 hours)
(600,000/2)=300,000; 300,000 x 15% = $45,000.
80 hours + 20 hours = 100 hours.

Example answer:
$45,000 / 100 hours = $450/hour.

PS. The real key to your financial future is learning to tweak your spending. Your return on that will be less than $450/hour, but enough to completely change your life. It looks like the options-and-tax thing is one of the best per-hour steps you can take to achieve your financial goals.

[ctuser1]

Sell a call option and buy a put option, around 10% out or more. There's some risk and you protect your current gains. Start unloading the position slowly.

You won’t save much on the 15% capital gains tax, of at all, trying this with the current LEAP options available from CBOT. Option premiums and time decay will make sure of that.

Most institutional investors use total return swaps for these types of tax avoidance schemes. I don’t know how a retail investor will access that. That stuff is only for ultra high net worth people ($30mm+) where an actual investment banker will work on it.

[bacchi]

Obvious solution:

Quit at the end of this year, reduce your spending, and sell enough stock in 2020 up to the 0% LTCG cut off. Repeat for the next 10 years.

[ChpBstrd]

Sell a call option and buy a put option, around 10% out or more. There's some risk and you protect your current gains. Start unloading the position slowly.

You won’t save much on the 15% capital gains tax, of at all, trying this with the current LEAP options available from CBOT. Option premiums and time decay will make sure of that.

Most institutional investors use total return swaps for these types of tax avoidance schemes. I don’t know how a retail investor will access that. That stuff is only for ultra high net worth people ($30mm+) where an actual investment banker will work on it.

@ctuser1 if the OP sells a call and buys a put, time decay will increase their wealth as the call declines and decrease their wealth as the put declines. Depending upon exactly which calls and puts the OP trades, they could set up a time-neutral position where the decay of the call offsets the decay of the put. E.g if they sell $10k worth of calls that are worth $2k in a couple years, and buy $10k of puts that are worth $2k in a couple years, their initial outlay and their outcome would both be zero.

This feature makes the “collar” option strategy a very inexpensive way to protect gains or reduce portfolio volatility. Using LEAPS one can lock in protection for a couple years at a time.

That said, the OP might be forced to sell near the time of the options’ maturity if AAPL rallies beyond the short call’s strike price. In such a scenario, the OP could also trade both their options for higher strike prices, thus still avoid having to sell their stock.