Author Topic: Name one stock to invest [a small sum] in  (Read 5523 times)

WerKater

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Name one stock to invest [a small sum] in
« on: August 21, 2016, 01:26:32 AM »
Almost all of my stash is in index funds, as it should be (I am at about 50% of my FIRE number). I started systematically investing into them 3.5 years ago.

However, before I got wise about how to invest properly, I did have an experimental period of stock- and bond-picking. It turned out that I was not as good at it as I thought then. Fortunately, I did not have much money to lose yet. And I learned a lot. So I don't really regret it.

Anyway, I have now finally cleaned this mess up. I sold all the stock and bonds (or let the bonds mature) and also sold some active funds. I invested all the proceeds into the index fund portfolio.
I did fuck up one thing tax-wise, however: In Germany, losses from the sale of stocks can't be used to offset capital gains from any other investments -- not even dividends (don't ask me why, but that's how it is). So, I now have about 800€ losses that I could use to offset some gains -- except I can't because I don't have any freaking stocks anymore. Capital gains tax is about 25%, so it's worth about 200€.

So, if I want to use these losses, I would need to buy some stock (let's say for 3000€) again, hold it until the gains have reached 800€ in a few years or so, then sell it. Necessary properties of the stock:
a) Large, stable company in a developed market (no too experimental stock-picking)
b) High liquidity, so I can sell it whenever I hit the 800€ gains (but that should be no problem for anything that fulfills property a)
c) Does not pay a dividend or only very little (I can't use the loss to offset those)

Any suggestions are welcome.

Or should I just:
- Forget about the whole thing and let the loss go to waste? Note: I don't mind the extra effort for 200€.
 
« Last Edit: August 21, 2016, 11:21:37 PM by WerKater »

Ursus Major

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Re: Name on stock to invest [a small sum] in
« Reply #1 on: August 21, 2016, 07:34:04 PM »
One stock that might fit the bill is Berkshire Hathaway B Shares (WKN: A0YJQ2). They should be liquid enough, even when traded in Germany.

Overall though I'm not so sure, that this is a good approach, to let the tax tail wash the investment dog. What would happen, if the stock drops 30% or 50%, after you buy it? Do you understand enough about the company to know, whether to hold or to fold?

mrpercentage

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Re: Name on stock to invest [a small sum] in
« Reply #2 on: August 21, 2016, 07:52:20 PM »
I love Berk but insurance claims from all our lovely weather may bite it in the short.

You have to buy a company you like because you are putting money at risk. So no.. let it go unless you are planing to hold something for a while. My stocks could take a 50% hit and I wouldn't sell or be too concerned but Im in high conviction securities right now.

they say wisdom comes from the mouths of babes and my one year old says WALMART. He says it a lot actually.

mrpercentage

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Re: Name on stock to invest [a small sum] in
« Reply #3 on: August 21, 2016, 08:48:37 PM »
See... what did I tell you

Financial.Velociraptor

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Re: Name on stock to invest [a small sum] in
« Reply #4 on: August 21, 2016, 09:55:00 PM »
For Germany, I like Allianz.   Solid company.

WerKater

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Re: Name on stock to invest [a small sum] in
« Reply #5 on: August 21, 2016, 11:44:54 PM »
Thanks for all the answers! So far, they basically mirror my thought processes.

One stock that might fit the bill is Berkshire Hathaway B Shares (WKN: A0YJQ2). They should be liquid enough, even when traded in Germany.
Yes, they were actually the number one candidate I had in mind.


Overall though I'm not so sure, that this is a good approach, to let the tax tail wash the investment dog. What would happen, if the stock drops 30% or 50%, after you buy it? Do you understand enough about the company to know, whether to hold or to fold?

[...]
You have to buy a company you like because you are putting money at risk. So no.. let it go unless you are planing to hold something for a while. My stocks could take a 50% hit and I wouldn't sell or be too concerned but Im in high conviction securities right now.
[...]

That's also something I wondered (and why I left open the possibility of not doing anything at all). I suppose the question is whether the increase in risk over the pure indexing approach is worth the additional tax savings. I am currently 50:50 on this.
I should say that I would have no problem holding the stock for 20 years (or longer) if necessary, so a serious drop would not make me sell. But you are right that it would need to be a company I have sufficient trust in. Berkshire Hathaway would be such a company and I do also like them -- not that that actually means a lot.

What's a high conviction security, by the way? Somehow my mind jumps to investments in prisons... I suppose that's not it?

For Germany, I like Allianz.   Solid company.
I do also think that they are solid (again, not that that means a lot, coming from me). Of course, they do pay quite a bit of dividend. I actually hate making investment decisions based on the method of distribution a company happens to have chosen. But for this case, it's fairly critical...
I don't really care which country the company would be in, by the way.

See... what did I tell you

That's incredibly cute ;)
And if you buy into the notion that you should invest in companies that you notice in your daily life (I am not sure where I read this), he is probably a much better investment expert than the ones we see on TV.

kenaces

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Re: Name one stock to invest [a small sum] in
« Reply #6 on: August 22, 2016, 12:25:24 AM »
can you just buy ETF and get same tax benefits you are seeking?

If yes there are tons of cheap ETFs that will track whatever index you want

WerKater

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Re: Name one stock to invest [a small sum] in
« Reply #7 on: August 22, 2016, 12:57:45 AM »
can you just buy ETF and get same tax benefits you are seeking?

If yes there are tons of cheap ETFs that will track whatever index you want
No, I can't. I am aware of ETFs and in fact, my index funds are all ETFs. But as I explained in the first post, I can't use losses from stocks to offset gains from anything else , including funds (be they ETFs or mutual funds).
« Last Edit: August 22, 2016, 12:59:24 AM by WerKater »

Proud Foot

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Re: Name one stock to invest [a small sum] in
« Reply #8 on: August 22, 2016, 09:32:31 AM »
I would second the BRK.B choice.  Are you able to carry forward the loss indefinitely or do you have a time frame you have to use the loss to cover your gains?  If you don't want BRK.B I would look at one of the large consumer staples companies.

WerKater

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Re: Name one stock to invest [a small sum] in
« Reply #9 on: August 22, 2016, 11:02:02 AM »
I would second the BRK.B choice.  Are you able to carry forward the loss indefinitely or do you have a time frame you have to use the loss to cover your gains?  If you don't want BRK.B I would look at one of the large consumer staples companies.
Assuming laws don't change, I can carry it forward indefinitely.
I am tending towards Berkshire Hathaway. But I also see the argument for not doing anything. I have to think about it a bit more, but I think it will come down to one of these possibilities.

Thanks to all for your input!

mrpercentage

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Re: Name one stock to invest [a small sum] in
« Reply #10 on: August 22, 2016, 01:17:55 PM »
High conviction just means that I'm unlikely to change my mind about it. News critics won't phase me and financial bloggers won't either. And neither will my current performance or a dividend cut. Although I have a yield I like to maintain so that may means I begin investing elsewhere

No I'm not invested in GEO. I stay clear of prisons and tobacco but most other things are fair game.
« Last Edit: August 22, 2016, 01:19:43 PM by mrpercentage »

SnackDog

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Re: Name one stock to invest [a small sum] in
« Reply #11 on: August 26, 2016, 09:38:56 AM »
BMW.

des999

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Re: Name one stock to invest [a small sum] in
« Reply #12 on: August 26, 2016, 10:43:26 AM »
DATA - tableau

SHOP - shopify

AAPL - apple

WerKater

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Re: Name one stock to invest [a small sum] in
« Reply #13 on: August 26, 2016, 11:03:08 AM »
Thanks, everyone, for your suggestions. I have decided that I will buy 3000 worth of Berkshire Hathaway as soon as I have the funds available (probably end of October). We can revisit this thread in about 5 years in order to figure out whether it worked!

valsecito

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Re: Name one stock to invest [a small sum] in
« Reply #14 on: August 26, 2016, 11:32:37 AM »
Thanks, everyone, for your suggestions. I have decided that I will buy 3000 worth of Berkshire Hathaway as soon as I have the funds available (probably end of October). We can revisit this thread in about 5 years in order to figure out whether it worked!
Why not European holdings like Pargesa, GBL, Ackermans & Van Haren, GIMV? After all, your expenses are in ...

MustacheAndaHalf

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Re: Name one stock to invest [a small sum] in
« Reply #15 on: August 26, 2016, 11:57:18 AM »
Why does it have to be one company's stock?  What if you purchase "VTI" (Vanguard Total Market ETF) instead?

WerKater

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Re: Name one stock to invest [a small sum] in
« Reply #16 on: August 26, 2016, 11:58:28 PM »
Thanks, everyone, for your suggestions. I have decided that I will buy 3000 worth of Berkshire Hathaway as soon as I have the funds available (probably end of October). We can revisit this thread in about 5 years in order to figure out whether it worked!
Why not European holdings like Pargesa, GBL, Ackermans & Van Haren, GIMV? After all, your expenses are in ...
Well, I never heard of any of them ;)
Concerning the currency: Yes, my expenses are in EUR, not in USD. They are also not in shares of BRK (or any other share). This question has already been discussed on the forum quite a bit and I don't want to revisit it completely. Main point: I don't agree with the notion that my expenses being in EUR implies that I should always prefer companies that happen to operate mostly in the Eurozone. (As long as we are talking developed markets where it a really serious currency/economy crash is relatively unlikely -- and if it happens it will probably hit the other developed markets, too).
Now, in the case of BRK, they do hold a large amount of cash, which is probably mostly in USD. However, I already hold some cash EUR. So, owning the USD cash (indirectly through my ownership of BRK) actually increases my currency diversification.

Why does it have to be one company's stock?  What if you purchase "VTI" (Vanguard Total Market ETF) instead?
Because I can't use my preexisting stock losses to offset fund/ETF gains (please see my first post). Otherwise, I wouldn't even have to ask the question. I already have ETFs.

k9

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Re: Name one stock to invest [a small sum] in
« Reply #17 on: August 29, 2016, 03:40:52 AM »
Yeah, I would have chosen BRK/B without any hesitation in your situation.

financialfreedomsloth

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Re: Name one stock to invest [a small sum] in
« Reply #18 on: September 01, 2016, 06:41:06 AM »
Thanks, everyone, for your suggestions. I have decided that I will buy 3000 worth of Berkshire Hathaway as soon as I have the funds available (probably end of October). We can revisit this thread in about 5 years in order to figure out whether it worked!
Why not European holdings like Pargesa, GBL, Ackermans & Van Haren, GIMV? After all, your expenses are in ...
All good stocks but they all pay dividends, which are probably taxed twice since he lives in germany...
He asked for something not paying a dividend (or a low one) since he mainly wants capital gains to offset a historic tax advantage he has for capital gains.

I too would advise Berkshire: it has outperformed the market in the past, no dividend, it is a very diversyfied holding company and a lot of the companies it owns also have earnings in EUR so I wouldn't sweat the USD currency.

Vagabond76

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Re: Name one stock to invest [a small sum] in
« Reply #19 on: September 01, 2016, 07:39:35 PM »
Berkshire is being propped up by the investment community's bromance with Warren Buffett. In reality, he is nothing but an old senile twit. Everything about him is a facade that will be exposed when he kicks the bucket.

financialfreedomsloth

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Re: Name one stock to invest [a small sum] in
« Reply #20 on: September 02, 2016, 02:00:26 AM »
Berkshire is being propped up by the investment community's bromance with Warren Buffett. In reality, he is nothing but an old senile twit. Everything about him is a facade that will be exposed when he kicks the bucket.

Please keep spreading the word!! I have a few more shares to buy and prefer to buy them cheap ... :-)

faramund

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Re: Name one stock to invest [a small sum] in
« Reply #21 on: September 02, 2016, 02:54:23 AM »
If you are talking about 300K, why just buy one stock? It'd be hard to find it again - but a while ago I read a study that reckoned that you could get most of the benefits of diversity by buying 10 stocks. So why not put 30K in 10 stocks.

As to which 10, maybe start by looking at the biggest non-dividend stocks (just some quick searching found
http://finance.yahoo.com/news/biggest-companies-dont-pay-dividends-180000561.html (although this link is 3 years old))

Which does raise a contradiction in what you what - growth stocks typically don't pay dividends and are riskier plays that are hoping for stronger growth. Dividend stocks tend to be the opposite - less risky and more moderate growth.

In the light of the above paragraph - its interesting to look at the list of companies in the above list - and think of what's happened to them since 2013.
« Last Edit: September 02, 2016, 03:14:38 AM by faramund »

Optimus Primal

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Re: Name one stock to invest [a small sum] in
« Reply #22 on: September 02, 2016, 06:55:04 AM »
Berkshire is being propped up by the investment community's bromance with Warren Buffett. In reality, he is nothing but an old senile twit. Everything about him is a facade that will be exposed when he kicks the bucket.

Berk is a bunch of real businesses with real earnings so what exactly do you think will be exposed when Buffett sails off into the sunset?  How about just start with one or two examples and connect them to BRK's valuation statistics so that we can understand your argument better.

talltexan

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Re: Name one stock to invest [a small sum] in
« Reply #23 on: September 02, 2016, 07:17:52 AM »
single stocks are for status. They're the ones that you'll compare notes on with friends and co-workers. The heavy-lifting is being done in your retirement accounts, so pick a company you can be proud to say you own. Google if you want to be the good guy, Amazon if you want to be a villain.

Proud Foot

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Re: Name one stock to invest [a small sum] in
« Reply #24 on: September 02, 2016, 08:22:16 AM »
Berkshire is being propped up by the investment community's bromance with Warren Buffett. In reality, he is nothing but an old senile twit. Everything about him is a facade that will be exposed when he kicks the bucket.

Berk is a bunch of real businesses with real earnings so what exactly do you think will be exposed when Buffett sails off into the sunset?  How about just start with one or two examples and connect them to BRK's valuation statistics so that we can understand your argument better.

I too would be interested in what will be exposed.  Like lazarus_long said, it is invested in real businesses with real earnings.  In my mind it is possible that there is a premium on the price due to the allure of Buffett but this isn't Enron where a lot of the underlying assets are made up.  And for all the transactions that take place I would guess Buffett doesn't even get involved unless they are above a certain amount.