Author Topic: I have $31k in AAPL stock, am I an idiot?  (Read 40181 times)

Allen

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I have $31k in AAPL stock, am I an idiot?
« on: August 28, 2014, 10:19:50 AM »
So, before I knew about index investing, I was SURE Apple was going to do well.  I invested about 10k in Apple and now it's worth about 30k (this is after pulling out 5k to pay off some debt)

It is mixed in a Roth IRA and IRA.  I still think AAPL is going to do extremely well, and from a buy and hold perspective, I think the dividends will be good too.  But, my total portfolio values for everything else (Which is all in index funds) is about $100k.  Total value $130k.

That AAPL is a *huge* portion of my portfolio, which creates risk.

Am I an idiot to just hang on to it?  I know I won't sell if it drops in half or less, but I get tempted to sell and put into index funds when it gets to new all time highs like this.  I'm not going to buy anymore as all future $$ go into index funds.

Keep or sell?  Keep some sell some?  Advice?

Dicey

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #1 on: August 28, 2014, 10:44:57 AM »
If this is all you are invested in then yes, politely, you are an idiot.

Diversification is your best bet for long-term gain. What you're doing is very risky. Since it paid off, why not use it as a jumping off point to make good moves in the future? Repeat to yourself: No individual stocks. No individual stocks. No individual stocks. Once you're set for FI, then go ahead and buy individual stocks if you want to gamble a little, but not before.

solon

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #2 on: August 28, 2014, 10:49:49 AM »
It's probably a little risky. I wouldn't sell, though. Just invest your new contributions in other stuff.

TrulyStashin

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #3 on: August 28, 2014, 11:09:53 AM »
It's probably a little risky. I wouldn't sell, though. Just invest your new contributions in other stuff.

+1   Add:  don't reinvest your AAPL dividends into AAPL.  Instead, use that cash dividend and buy stock in other companies to increase your diversification.

JetBlast

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #4 on: August 28, 2014, 11:23:13 AM »
The fact that you're asking about this makes me think you're at least a little uncomfortable with your current allocation, but at the same time you clearly want to hang on to AAPL. Why not just take your initial $10k off the table?  You make sure AAPL doesn't turn into a money losing venture while keeping enough to significantly profit if you're right about its future. You can use the $10k to increase the diversification of your portfolio.

Kaspian

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #5 on: August 28, 2014, 11:31:45 AM »
Am I an idiot to just hang on to it? 

Haha...  Though I have no crystal ball to say where Apple will be in 10 years, tech can be fickle.  You might want to ask people who invested in Pitney-Bowes in the 1990s about it.

diesel15

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #6 on: August 28, 2014, 11:32:01 AM »
I know I won't sell if it drops in half or less, but I get tempted to sell and put into index funds when it gets to new all time highs like this.  I'm not going to buy anymore as all future $$ go into index funds.

Keep or sell?  Keep some sell some?  Advice?

First off, you've tripled your original investment so congrats on being an "idiot".  If you feel like the risk is too high for you with this large of a percentage of your portfolio in AAPL why not set a stop limit on this to make sure that your profits are locked in at a certain level?  If it declines in value below your threshold it will automatically sell and you can reinvest the proceeds in a more diversified way and if it continues to climb you continue to make money on it.  If you still believe in Apple and think it will do well in the future I see no reason to sell just for the sake of selling.  Don't make the mistake though of riding it into the ground and hoping for a rebound if it tanks.  A wise man once told me "nobody ever went broke taking a profit".  Develop an exit strategy if you are uncomfortable with the weight within your portfolio and then stick to it. 

sol

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #7 on: August 28, 2014, 11:33:24 AM »
APPL is 3.36% of SPY so I've got about that much too.  Doesn't really worry me, we're all overinvested in big US multinationals.  Par for the course when indexing.

nordlead

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #8 on: August 28, 2014, 11:35:51 AM »
APPL is ~2.7% of total stock (VTSAX for example since you didn't say what index you were following), which means that you are...

25.1% APPL, and 75% everyone else (with the next closest holding of Exxon at only 1.5%, or maybe someone like Google who has various investor classes, but I doubt it is higher).

Do you really believe that APPL is going to outperform significantly outperform the likes of Google, or Facebook, or any of the other highly popular tech company? Since Facebook's IPO, the biggest winners have been Facebook, Google, S&P500, and then Apple, where Facebook's total return is ~100%, and Apple's total return was only ~25% (and the S&P500 ~50%).

It seems to me that you would have done better over the last 1.5 years indexing, and even better if you were a better stock picker. Personally, I'd sell, but if you want to concentrate on high flying technology then maybe diversify a little. Maybe get a basket of tech companies either through the NASDAQ composite (which matched the S&P500 since the FB IPO), or something else.

Oh, and I wish I bought APPL years ago, but hindsight is 20/20.

kyleaaa

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #9 on: August 28, 2014, 02:02:31 PM »
Smart move would be to sell it since there would be no tax consequences for doing so. You got lucky and won the mini-lottery. Cash out!

Franklin

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #10 on: August 28, 2014, 02:15:53 PM »
I'm not going to tell you to sell one of the best companies in America, and the SPY allocation of AAPL is case in point.  But I agree that you must be asking for a reason, so you should probably trim back your initial investment and play with house money.  That would be 5K since you already pulled 5K.

Angie55

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #11 on: August 28, 2014, 02:22:40 PM »
I have 95% (30k) of a previous 401k in ExxonMobil stock. So I have exactly the same feeling! Except mine has not done nearly as well as it was bought during the high time.

I'm just not sure how/what to do about it. I had thought because it was a previous 401k that if I wanted to change the allocation I'd have to rollover to another account somewhere first. That probably makes me more of an idiot.

billygoat

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #12 on: August 28, 2014, 02:27:37 PM »
The general rule of thumb that I've read on many occasions is that you never want more than 5 percent of your portfolio in any one stock. (yes, citation needed, but you won't get one)

Saying that 30k is a lot depends on the overall size of the portfolio. It might be wayyyy too much, or a drop in the bucket. In your case, since you're asking the question, it is likely the former. Sell some.

WP


Eric

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #13 on: August 28, 2014, 02:35:17 PM »
Smart move would be to sell it since there would be no tax consequences for doing so. You got lucky and won the mini-lottery. Cash out!

Yep!

daveydinner

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #14 on: August 28, 2014, 02:48:03 PM »
Similar dilemma, I bought some Tesla when it was $30/share, before it was "momentum" stock. Just a little side gamble. But now it's done so well that it's a huge percentage of the portfolio. i KNOW i should rebalance. but i BELIEVE there's nowhere but up for this company...

Northerly

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #15 on: August 28, 2014, 02:51:19 PM »
Remember the irrelevance of sunk costs and past decisions. You might ask yourself: "If I were in an all cash position and wanted to invest, would I allocate over 20% to AAPL?" If the answer is no, reallocate now. A similar way of framing the question is "Will I allocate over 20% to AAPL moving forward?" Again, if the answer is no, correct your current allocation.

FirePaddle

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #16 on: August 28, 2014, 03:00:42 PM »
I think it really does depend on your comfort level with the risk.  I had about 30% our our investments in Apple and Google, where we already made some good cash on, but I was worrying about it too much.  I sold and transferred into index funds (which appl and goog are usually top stocks in those anyway) but kept some to allow me to still take advantage of the future gains, but not be so impacted if they do go down.

tkurk

Allen

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #17 on: August 28, 2014, 04:01:58 PM »
It's funny and purely emotional.  Since I'm already playing with "house money" so to say, if it dropped 50% I'd be OK with that and just keep holding it, but if I sold it and it went up 50% I'd be very upset because my gut says to hang onto it.  My brain says to take my winning and rebalance.

Gut vs head for me.

And yes, Apple is like 30% of my entire holdings, that is too much in one stock, right?  But the only reason it's 30% is because it's done so well.

CanuckExpat

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #18 on: August 28, 2014, 04:09:56 PM »
And yes, Apple is like 30% of my entire holdings, that is too much in one stock, right?  But the only reason it's 30% is because it's done so well.

That is for you to decide. What does your Investment Policy Statement say?

fartface

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #19 on: August 28, 2014, 04:30:07 PM »
I'd sell half as long as it keeps you in your current tax bracket. Remember, you'll have to pay capital gains. If it bumps you into the next tax bracket then sell less.

Allen

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #20 on: August 28, 2014, 04:48:33 PM »
I'd sell half as long as it keeps you in your current tax bracket. Remember, you'll have to pay capital gains. If it bumps you into the next tax bracket then sell less.

It is held about ⅔ in an IRA and ⅓ in a Roth IRA so selling has no tax consequence for me.

Allen

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #21 on: August 28, 2014, 04:49:48 PM »
And yes, Apple is like 30% of my entire holdings, that is too much in one stock, right?  But the only reason it's 30% is because it's done so well.

That is for you to decide. What does your Investment Policy Statement say?

My policy is that I'm an index investor.  This is from before that policy for me.

matchewed

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #22 on: August 28, 2014, 04:54:13 PM »
And yes, Apple is like 30% of my entire holdings, that is too much in one stock, right?  But the only reason it's 30% is because it's done so well.

That is for you to decide. What does your Investment Policy Statement say?

My policy is that I'm an index investor.  This is from before that policy for me.

To be fair your policy should incorporate your current assets. For example in mine I do own some individual shares of companies prior to my decision to use index funds as well. Here is how I've approached it.

Quote
Asset Allocation 95/5 Equity/Bond
Current Equity Allocation
Total US Market 30%   
Large Cap 35%       
Mid to Small Cap 15%   
Individual Stock 20%

Equity Allocation Note As time goes on I will increase my percentage of Total US Market as that will be what I choose to invest in going forward. My percentage of the other sections of my equity allocation will reduce over time.

I've basically accepted the portion that is in individual stock and realized that the portion will become a smaller and smaller percentage of my portfolio as I keep investing. There will be many ways to do it but you should incorporate it into your IPS.

thedayisbrave

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #23 on: August 28, 2014, 05:36:23 PM »
I personally would sell... I mean, you've got a nice tax-free gain there that you can throw to index funds and not have to worry about anymore.

LAWson

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #24 on: August 28, 2014, 05:58:56 PM »
You aint the biggest idiot around. I have over $31k in what people call a "penny stock." I also have close to $30k in a small-cap biotech.
« Last Edit: August 28, 2014, 06:01:45 PM by LAWson »

CanuckExpat

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #25 on: August 28, 2014, 06:29:31 PM »
My policy is that I'm an index investor.  This is from before that policy for me.

So then why not sell? It sounds like you will have no tax liability, and I'm assuming the transactions costs are minimal.

If you had $30,000 in cash, and no AAPL stock, would you buy AAPL?
If not, why would you hold onto AAPL stock instead of turning it into $30,000 in cash? (which you could then re-invest according to your policy)

The two scenarios are equivalent, minus taxes, transaction costs, sunk cost fallacy and emotions :)

Rob

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #26 on: August 28, 2014, 06:57:27 PM »
My opinion, which will be rejected by the majority, is that you might as well wait a few months until the iPhone 6 numbers get into the earnings. Can't see it not being a huge success. Event is Sept 9th. Any wearable tech they introduce is gravy.

If it makes you uncomfortable, or are uncomfortable with the company's outlook, sell some.

Full disclosure: I am long AAPL and it is about 28% of my portfolio, which I am not uncomfortable with. I reinvest the dividends and they have had fantastic gains over the last 18 months.
« Last Edit: August 28, 2014, 06:59:08 PM by Rob »

tarheeldan

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #27 on: August 28, 2014, 08:01:43 PM »
I second diesel15's idea - put on a sell stop. If it goes up, move the stop up. Let the gains go, and if you get stopped out then your allocation problem is solved and you did quite well on the trade.

jzb11

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #28 on: August 29, 2014, 06:07:55 AM »
I have:

20k in Apple
10K in TWTR

This is in a taxable brokerage account, I bought these stocks in may and I'm up 22% on apple and 52% on twitter. I'm not feeling like an idiot at all and at the moment both companies have a major upside. I will hold onto both until the end of the year at the earliest.

I made a calculated decision buying both stocks, my only regret is not buying apple in 2013 when it hit a low of 385 ($55 in the current price which is now at $102)!

ZiziPB

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #29 on: August 29, 2014, 06:50:23 AM »
I recently sold my AAPL stock.  Here is the discussion surrounding my decision:

http://forum.mrmoneymustache.com/investor-alley/apple-sell-now-or-wait-for-the-stock-split/

Franklin

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #30 on: August 29, 2014, 07:44:31 AM »
I second diesel15's idea - put on a sell stop. If it goes up, move the stop up. Let the gains go, and if you get stopped out then your allocation problem is solved and you did quite well on the trade.

+1   This is always the best way to ride a winner.  So basic, but so rarely used.  I'm not sure I understand the rationale to blindly sell, or for tracking the ratio of individual stocks.

Here is another way to look at it.  You have tripled your money.  Using the Rule of 115, an index fund at 7% CAGR will triple in 16 years.  How long have you owned Apple?  A winner is a winner and should be protected.  But it shouldn't be sold irrationally.  There is a big difference between romanticizing a winner and actually having one.

soccerluvof4

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #31 on: August 29, 2014, 09:23:31 AM »
^+2 using the Stop. Give the stock a chance to give you further gains while protecting yourself.

ioseftavi

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #32 on: August 29, 2014, 10:27:49 AM »
I'd sell, since you've got great gains and it's not a taxable event.  And I'd sell it all, since you describe yourself as an indexer at present.  This is an enormous allocation to a single stock.  Yes, it's worked out well.  But it's still a huge allocation - generally the rule of thumb I follow is is that you can keep up to 10% of your assets in a single stock, if you work there and acquired the position through an ESOP or performance shares, etc.  Unless you're a C-level exec or manager at AAPL (who is being incentivized through his/her holdings), there's no reason to have so much of your portfolio in one stock.  Pat yourself on the back and take some risk off the table.

Alternately, if that didn't convince you, I have (in the spirit of face-punchyness) also written a ruder version of my advice:

Are you fucking kidding me?  You're not a college student day trading shares of of some penny stock involved in medical marijuana because you think the goddamn ticker's hilarious.  OK - granted, Apple's not a penny stock.  But this is a third of your investable assets.  You are a mustachian, relentlessly focused on optimizing your portfolio, and getting the best return you can for a chosen level of risk, at the minimum possible expense.  This is not a businesslike way to manage your portfolio.  If you're an indexer, then repent your stock-picking ways, sell the damn stock, and move on with your life.  You can tell the story at cocktail parties for the next decade.  If you're NOT an indexer, then fine - but you should not be holding individual stocks if you haven't got some fundamental analysis showing why you think the hassle and risk of this position is worth it.  "I like their products and I think the iPhone 6 is gonna be a hit" is not valid fundamental analysis.  That's bullshit analysis, and a bullshit reason to continue subjecting yourself to this kind of risk.  $30,000 is not only a third of your investments, it's also an objectively large amount of money.  For most people on the MMM boards, that is probably nearly a year - maybe more - of living expenses.  You're telling me that you'd be zen about if if you knew it was cut in half?  COME.  ON.  Sell the stock, re-invest into your normal asset allocation, and consider it walking out of a casino with some of the house's money.

</rant>

OK, I'm not actually butt-hurt, or shouting at you, Allen.  But I toyed with both versions of this response and couldn't pick one.

My actual "do the logical thing" advice would be to sell it all immediately and re-invest into indexes fitting your asset allocation.  My "human beings are not logical automatons, they are illogical bags of meat" advice would be to sell $20k immediately and hold $10,000.  You'll still feel like you're 'playing the game', but you'll reduce your level of risk to a level that's not insanely high. 

Either way - best of luck!  Let us know what you pick.

hodedofome

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #33 on: August 29, 2014, 11:42:58 AM »
If you decide to go with the stop loss route, it's important to objectively define your exact exit point and actually STICK to it. If you make a mental stop in your head to get out below $90, and it trades below $90 but you decide in the moment to not sell, you've done yourself no favors.

I personally prefer a more intelligent trailing stop than just a dollar amount or a %. Using a moving average or volatility-based trailing stop is much better IMO. It is up to YOU however to determine what your timeframe is. Do you want to let AAPL have a lot of room to gyrate back and forth (which is normal) so it doesn't sell you out prematurely, or will you freak out at anything more than a 10% pullback? Giving it more room allows you to possibly participate in the trend longer, however it also gives up the most $$ when the trend actually ends and starts to go down.

Here is a link to a few different ideas for trailing stops. On the chart is the 50 day moving average in blue (a medium-term MA), a 200 day moving average in red (more long-term) and a volatility-based chandelier exit in green. http://stockcharts.com/h-sc/ui?s=AAPL&p=D&b=5&g=0&id=p52644699979

The chandelier exit uses all the prices from throughout the trading day for the past month and then, as I've defined it here, plots that average price 5x away from today's price. You can see how it trails the uptrend pretty nicely but wouldn't give up too much $$ if the trend stopped. The 50 day moving average is also doing a nice job, and the 200 day ma is pretty far away. You would need to decide, beforehand, which one you want to use and if the price CLOSES below that line at the end of the day, sell it at the market open the next day. There's a lot of noise intra-day and you don't want to get caught up in that, just use closing prices at the end of the day.

Yet another way to go about this, is to look at how AAPL is performing RELATIVE to the rest of the market. Is it doing better than the rest of the market? It may be worth hanging on to. Is it doing worse? May not be a bad time to cash it in. You can plot this on a chart pretty easily and use the same trailing stop methodology that I described above. When AAPL is doing worse than the general market and drops below the 50 or 200 day MA, or the chandelier exit, then sell it. http://stockcharts.com/h-sc/ui?s=AAPL:VTI&p=D&b=5&g=0&id=p93184986897

In any case, if you find yourself watching AAPL's price every day wondering what the heck to do, it may not be a bad idea to just sell out and get on with your life.

 

KingCoin

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #34 on: August 29, 2014, 12:58:31 PM »
There's not a single rational reason to hold this large a position in AAPL besides a a belief that you know better than the market what the fair price for AAPL stock is (hint: you don't). Every justification listed above for holding the position (including using a stop-loss) is simply to scratch an emotional itch.

A lot of commentors have framed this as an issue of risk tolerance. However, that's not really an accurate assessment.  You can achieve the same expected returns with lower volatility (or higher expected returns with the same volatility) in a more diversified portfolio. Diversification is one of the few free lunches in investing; ignore it at your own peril.

Chuck

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #35 on: August 29, 2014, 01:33:08 PM »
Don't sell it right now. Mobile payments through the phone wearable, Apple Carplay coming to nearly every new car AND Homekit making that "Home of the Future" thing finally a reality... the product pipeline is about to DEVOUR consumer sucka dollars.

Set a Stop on it. Don't reinvest the dividends, put them elsewhere. Done.

bluecollarmusician

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #36 on: August 29, 2014, 04:41:24 PM »
Yep, it is usually a good idea to sell your winners. 
I probably should have sold Apple the first time it tripled.  Or when it split.  Or when it hit 700.  Or when it split 7 for 1.

I see wisdom in a trailing stop, or selling some call options.  I have done that at several points when the stock seemed a little over value, and I wouldn't have minded selling a few shares at those times.

To each their own.  Do your index investing- I have done plenty of that.  But there is nothing wrong with riding a strong winner. 

Dicey

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #37 on: August 29, 2014, 06:38:59 PM »
I'd sell, since you've got great gains and it's not a taxable event.  And I'd sell it all, since you describe yourself as an indexer at present.  This is an enormous allocation to a single stock.  Yes, it's worked out well.  But it's still a huge allocation - generally the rule of thumb I follow is is that you can keep up to 10% of your assets in a single stock, if you work there and acquired the position through an ESOP or performance shares, etc.  Unless you're a C-level exec or manager at AAPL (who is being incentivized through his/her holdings), there's no reason to have so much of your portfolio in one stock.  Pat yourself on the back and take some risk off the table.

Alternately, if that didn't convince you, I have (in the spirit of face-punchyness) also written a ruder version of my advice:

Are you fucking kidding me?  You're not a college student day trading shares of of some penny stock involved in medical marijuana because you think the goddamn ticker's hilarious.  OK - granted, Apple's not a penny stock.  But this is a third of your investable assets.  You are a mustachian, relentlessly focused on optimizing your portfolio, and getting the best return you can for a chosen level of risk, at the minimum possible expense.  This is not a businesslike way to manage your portfolio.  If you're an indexer, then repent your stock-picking ways, sell the damn stock, and move on with your life.  You can tell the story at cocktail parties for the next decade.  If you're NOT an indexer, then fine - but you should not be holding individual stocks if you haven't got some fundamental analysis showing why you think the hassle and risk of this position is worth it.  "I like their products and I think the iPhone 6 is gonna be a hit" is not valid fundamental analysis.  That's bullshit analysis, and a bullshit reason to continue subjecting yourself to this kind of risk.  $30,000 is not only a third of your investments, it's also an objectively large amount of money.  For most people on the MMM boards, that is probably nearly a year - maybe more - of living expenses.  You're telling me that you'd be zen about if if you knew it was cut in half?  COME.  ON.  Sell the stock, re-invest into your normal asset allocation, and consider it walking out of a casino with some of the house's money.

</rant>

OK, I'm not actually butt-hurt, or shouting at you, Allen.  But I toyed with both versions of this response and couldn't pick one.

My actual "do the logical thing" advice would be to sell it all immediately and re-invest into indexes fitting your asset allocation.  My "human beings are not logical automatons, they are illogical bags of meat" advice would be to sell $20k immediately and hold $10,000.  You'll still feel like you're 'playing the game', but you'll reduce your level of risk to a level that's not insanely high. 

Either way - best of luck!  Let us know what you pick.

Should MMM ever get around to having one, this response is my candidate for the Mustachian Hall of Fame. An instant classic! Brilliant!
Ioseftavi, I hope to read a lot more from you in the future!

skyrefuge

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #38 on: August 29, 2014, 10:29:48 PM »
wait a few months until the iPhone 6 numbers get into the earnings. Can't see it not being a huge success. Event is Sept 9th. Any wearable tech they introduce is gravy.
I'm not feeling like an idiot at all and at the moment both companies have a major upside.
Don't sell it right now. Mobile payments through the phone wearable, Apple Carplay coming to nearly every new car AND Homekit making that "Home of the Future" thing finally a reality... the product pipeline is about to DEVOUR consumer sucka dollars.

IMO, the simplistic first-order thinking displayed by those who advocate stock-picking is all you need to know to decide which is the smarter route to take!

Manguy888

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #39 on: August 30, 2014, 08:36:38 AM »
If this were in a taxable account I would say just hold onto it to avoid capital gains taxes on selling.

BUT - you said your AAPL is in roth and regular IRA. Because of this, I would sell and purchase index funds with the money. congrats, you've tripled your money on what was essentially a bet. Now cash in the chips and diversify for a safer long term investment picture.

apple is clearly a stable company, but the law of large numbers practically guarantees that it will never again triple the way it did with your original 10k investment.

I work for a fortune 500 and realized a few yeras ago that my 401k was way overloaded with my company's stock (it's what they matched with). after I moved it into more diverse investments, the stock practically doubled over 6 months and i lost out. Did I make the wrong move? only if i cared about my short term performance.

Cottonswab

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #40 on: August 30, 2014, 11:26:30 PM »
Add Apple to your investment policy statement and specify maximum allocation, as a % of your assets. Then make the reality match your policy.   

I personally limit allocation to individual stocks to < 5% of my total investable assets. 

Rob

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #41 on: August 31, 2014, 04:41:47 PM »
wait a few months until the iPhone 6 numbers get into the earnings. Can't see it not being a huge success. Event is Sept 9th. Any wearable tech they introduce is gravy.
I'm not feeling like an idiot at all and at the moment both companies have a major upside.
Don't sell it right now. Mobile payments through the phone wearable, Apple Carplay coming to nearly every new car AND Homekit making that "Home of the Future" thing finally a reality... the product pipeline is about to DEVOUR consumer sucka dollars.

IMO, the simplistic first-order thinking displayed by those who advocate stock-picking is all you need to know to decide which is the smarter route to take!

I can do the same thing. The only reasons presented by the sell side have been "first-order" thinking that's it's impossible to invest money in a stock that will outperform the market and to do so, even if 70% of your stocks in index funds, is a sure path to a lifetime of market-trailing returns.

"Repeat to yourself: No individual stocks. No individual stocks. No individual stocks. Once you're set for FI, then go ahead and buy individual stocks if you want to gamble a little, but not before."

"Smart move would be to sell it since there would be no tax consequences for doing so. You got lucky and won the mini-lottery. Cash out!"

"I personally would sell... I mean, you've got a nice tax-free gain there that you can throw to index funds and not have to worry about anymore."

If anything, the basic "hold" side arguments have more (albeit incredibly minor) analysis. Indexing vs. stocks has been debated ad infinitum. If he wants to be a 100% index investor, sell. If he want to be a 70% index investor and believes AAPL has a good shot at growing more quickly than the average, then hold.


KingCoin

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #42 on: August 31, 2014, 05:10:04 PM »
wait a few months until the iPhone 6 numbers get into the earnings. Can't see it not being a huge success. Event is Sept 9th. Any wearable tech they introduce is gravy.
I'm not feeling like an idiot at all and at the moment both companies have a major upside.
Don't sell it right now. Mobile payments through the phone wearable, Apple Carplay coming to nearly every new car AND Homekit making that "Home of the Future" thing finally a reality... the product pipeline is about to DEVOUR consumer sucka dollars.

IMO, the simplistic first-order thinking displayed by those who advocate stock-picking is all you need to know to decide which is the smarter route to take!

I can do the same thing. The only reasons presented by the sell side have been "first-order" thinking that's it's impossible to invest money in a stock that will outperform the market and to do so, even if 70% of your stocks in index funds, is a sure path to a lifetime of market-trailing returns.

"Repeat to yourself: No individual stocks. No individual stocks. No individual stocks. Once you're set for FI, then go ahead and buy individual stocks if you want to gamble a little, but not before."

"Smart move would be to sell it since there would be no tax consequences for doing so. You got lucky and won the mini-lottery. Cash out!"

"I personally would sell... I mean, you've got a nice tax-free gain there that you can throw to index funds and not have to worry about anymore."

If anything, the basic "hold" side arguments have more (albeit incredibly minor) analysis. Indexing vs. stocks has been debated ad infinitum. If he wants to be a 100% index investor, sell. If he want to be a 70% index investor and believes AAPL has a good shot at growing more quickly than the average, then hold.

While the advocates of selling may be doing first-order analysis, it's first-order analysis based on sound theory. A diverse portfolio of stocks has the same expected return as a concentrated portfolio, but with lower volatility. This makes holding a concentrated portfolio a categorical error.

Saying the stock is probably going to go up because the iPhone 6 is going to be cool isn't sound theory, it's hand waving.


Rob

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #43 on: September 01, 2014, 08:58:59 PM »
wait a few months until the iPhone 6 numbers get into the earnings. Can't see it not being a huge success. Event is Sept 9th. Any wearable tech they introduce is gravy.
I'm not feeling like an idiot at all and at the moment both companies have a major upside.
Don't sell it right now. Mobile payments through the phone wearable, Apple Carplay coming to nearly every new car AND Homekit making that "Home of the Future" thing finally a reality... the product pipeline is about to DEVOUR consumer sucka dollars.

IMO, the simplistic first-order thinking displayed by those who advocate stock-picking is all you need to know to decide which is the smarter route to take!

I can do the same thing. The only reasons presented by the sell side have been "first-order" thinking that's it's impossible to invest money in a stock that will outperform the market and to do so, even if 70% of your stocks in index funds, is a sure path to a lifetime of market-trailing returns.

"Repeat to yourself: No individual stocks. No individual stocks. No individual stocks. Once you're set for FI, then go ahead and buy individual stocks if you want to gamble a little, but not before."

"Smart move would be to sell it since there would be no tax consequences for doing so. You got lucky and won the mini-lottery. Cash out!"

"I personally would sell... I mean, you've got a nice tax-free gain there that you can throw to index funds and not have to worry about anymore."

If anything, the basic "hold" side arguments have more (albeit incredibly minor) analysis. Indexing vs. stocks has been debated ad infinitum. If he wants to be a 100% index investor, sell. If he want to be a 70% index investor and believes AAPL has a good shot at growing more quickly than the average, then hold.

While the advocates of selling may be doing first-order analysis, it's first-order analysis based on sound theory. A diverse portfolio of stocks has the same expected return as a concentrated portfolio, but with lower volatility. This makes holding a concentrated portfolio a categorical error.

Saying the stock is probably going to go up because the iPhone 6 is going to be cool isn't sound theory, it's hand waving.

I didn't interpret the OP's topic as yet another question on individual stocks vs. indexing as it seems they have already come to the conclusion that indexing is what they want to do with the majority of their portfolio. However, they are still bullish on AAPL's long-term prospects and still want to keep a portion of their portfolio in AAPL.

Perhaps 23% is too much, I don't think anyone would argue if the OP wanted to reduce that %, but I don't agree that it is impossible to analyze a company like AAPL and to come to the conclusion that it is more likely to appreciate at a faster rate than the SP500. I don't think keeping something like 10% in the stock is crazy. It's not like it's TSLA. AAPL has billions upon billions of dollars that it will be leveraging and paying to investors for many years to come. I can also say that simply stating it's impossible to allocate a % of your portfolio to an asset that will beat the index is hand-waving. You may not agree with a certain strategy, but that doesn't mean that it will ultimately fail.

As an aside, my post didn't say that I thought the iPhone 6 was cool so buy AAPL. A successful product is a term you can benchmark and forecast, both in terms of revenue and earnings. It's different than saying it will be cool. If you are saying it is unlikely to correctly forecast such things, then I fundamentally disagree. If you want to go to the second level of thought, and believe the stock price is based on others "forecasts of the forecasts" etc., and that it is impossible to know what will be viewed as a success, I again disagree. Which is completely fine, and I think indexing is a fantastic strategy in general and the one I recommend in most cases.

skyrefuge

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #44 on: September 02, 2014, 10:23:33 AM »
The only reasons presented by the sell side have been "first-order" thinking that's it's impossible to invest money in a stock that will outperform the market and to do so, even if 70% of your stocks in index funds, is a sure path to a lifetime of market-trailing returns.

Yeah, I actually agree with you, to the extent that there are surely tons of people out there who index simply because "someone (dad, financial advisor, colleague, MMM) told me it was a good idea". But that's part of the beauty of indexing: smarter people have already figured it out for you, so knowledge of the underlying theories are not actually required to be successful. In contrast, to be a market-beating stock-picker, you personally must be smarter than everyone else and have deep knowledge of the underlying systems.

If coming to a decision to fly somewhere, the first-order-thinking stock-picker might say "birds have feathers on their arms, so if I glue feathers to my arms and jump off a cliff, I'll be able to fly!" While the first-order-thinking indexer, who is equally ignorant about the laws of physics, says "lots of people seem to have success flying in airplanes, so I'll just buy a ticket on United". One is much more likely to have a successful flight than the other. (and of course this is not to say that the cliff-jumping strategy is completely impossible, if the requisite higher-order thinking is actually employed.)

I just cringe whenever I see amateur stock-pickers who seem to think that buying "good, solid companies" is the trick to avoiding risk and beating the market, when it's "companies that are secretly gooder and solider than everyone else thinks they are" that's required.
« Last Edit: September 02, 2014, 01:20:39 PM by skyrefuge »

Northerly

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #45 on: September 02, 2014, 11:25:49 AM »
Man, all this irrational exuberance about AAPL has me thinking I should short it ;).

Rob

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #46 on: September 02, 2014, 05:56:55 PM »
The only reasons presented by the sell side have been "first-order" thinking that's it's impossible to invest money in a stock that will outperform the market and to do so, even if 70% of your stocks in index funds, is a sure path to a lifetime of market-trailing returns.

Yeah, I actually agree with you, to the extent that there are surely tons of people out there who index simply because "someone (dad, financial advisor, colleague, MMM) told me it was a good idea". But that's part of the beauty of indexing: smarter people have already figured it out for you, so knowledge of the underlying theories are not actually required to be successful. In contrast, to be a market-beating stock-picker, you personally must be smarter than everyone else and have deep knowledge of the underlying systems.

If coming to a decision to fly somewhere, the first-order-thinking stock-picker might say "birds have feathers on their arms, so if I glue feathers to my arms and jump off a cliff, I'll be able to fly!" While the first-order-thinking indexer, who is equally ignorant about the laws of physics, says "lots of people seem to have success flying in airplanes, so I'll just buy a ticket on United". One is much more likely to have a successful flight than the other. (and of course this is not to say that the cliff-jumping strategy is completely impossible, if the requisite higher-order thinking is actually employed.)

I just cringe whenever I see amateur stock-pickers who seem to think that buying "good, solid companies" is the trick to avoiding risk and beating the market, when it's "companies that are secretly gooder and solider than everyone else thinks they are" that's required.

I've said that I think indexing is a fantastic strategy in general, so I'm mostly in agreement with you. But I don't think that choosing one stock that will beat the market is as impossible or unlikely as most people on this forum make it out to be. Consistently doing so time and time again with hundreds of different stocks over a lifetime of investing is a different debate to me.

I'm also not sure I understand why higher-order thinking applies to a single stock but not to an index. All those stocks in an index are priced based on the supposed higher level thinking. If your answer is diversification, then I would argue that I don't believe a portfolio that has 80-90% or whatever indexed and the remainder in a few stocks that you feel great about as undiversified. I think the higher-order thinking is and over-intellectualization. It's not impossible to get a feeling for the overall sentiment on a stock. If you feel differently than the sentiment, you can invest based on that. Apple is a perfect example of this. About 18 months ago, it was pretty easy to determine the sentiment on AAPL was not great. It's PE was lower than 12. I don't need to think anything besides, hey - that P/E is really low. The market is not feeling to great about AAPLs prospects continue to grow. On the other hand, I feel great about AAPLs growth prospects. So I invest. There is no second-order thought needed there. If AAPL continues to grow, it's going up (from that point in 2012). No doubt about it.

Allen

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #47 on: September 09, 2014, 10:07:30 AM »
I had a sell order entered but never actually clicked "place order"

I just couldn't bring myself to do it.

I wanted to publicly go on record prior to the event as having not sold my AAPL shares yet so that I can get either "you idiot" face punches or "you LUCKY idiot" face punches.

Carry on.

Franklin

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #48 on: September 09, 2014, 11:42:58 AM »
I had a sell order entered but never actually clicked "place order"

I just couldn't bring myself to do it.

I wanted to publicly go on record prior to the event as having not sold my AAPL shares yet so that I can get either "you idiot" face punches or "you LUCKY idiot" face punches.

Carry on.

Did you at least put in your stop order?  Then let it ride baby!

solon

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Re: I have $31k in AAPL stock, am I an idiot?
« Reply #49 on: September 09, 2014, 02:04:16 PM »
AAPL closed down today!