Sell individual stock holdings and reinvest, or continue to hold?

[MoneyStubble25]

Right around the bottom of the recession I got into the individual stock game at some very low buy ins. I did very well on those, and have continued to hold them for the last few years. It's not a lot of money, around $5K, and my initial investment was around $1,200.

Portfolio is a mixture of Apple (the vast majority of my gains) two household names in the cpg business, and a bank. All pay nice dividends and I've made a few extra hundred dollars through mergers and buyouts that paid me a premium in cash, which I reinvested elsewhere. All and all I've been pretty lucky with these picks, with total gains 4x to 5x my initial investment. Over the last few years I've taken a hold approach to these and have reinvested dividends.

Obviously popular wisdom on this blog is to not go the individual stock route, and by and large I agree. I invest monthly in a Betterment account and max out the 401K in 90% stock, 10% bond funds. Betterment is the same. I no longer buy individual stocks but have held on to the ones I already own. I'm in my mid 30s with a 20 year timeline untill FI. Am holding a fair amount of cash for a home purchase with the future wife in the next 1 - 2 years.

Basically my question is, should I sell and reinvest these via Betterment, or is holding an OK strategy? I'm also concerned about the tax implications of selling, as I'd have to pay capital gains on the increases. At 15% that could be pretty significant, and could take awhile to grow out of that loss via mutual funds. I'm expecting a tax bill increase this year post combining incomes with my future wife. We both make decent middle to upper middle class professional salaries.

[dandarc]

Meh.  If you want to keep them, $5K is pretty small-potatoes.  If you are inclined to sell, not much of big deal there too.  If this was 50% of your 100K+ portfolio, the tax implications would be more of a concern - for $5K, I'd base my decision more on convenience and what I wanted to do.

[forummm]

Yeah, it doesn't matter too much what you do for such a small amount of money. Since they are long term capital gains, you would pay either no or very little tax on it. I would probably just sell and move the funds to an index (which has also done quite well since the bottom of the recession). But up to you.

[Scandium]

At 15% that could be pretty significant, and could take awhile to grow out of that loss via mutual funds. I'm expecting a tax bill increase this year post combining incomes with my future wife. We both make decent middle to upper middle class professional salaries.

If both your withholding are set up right why would your tax bill change (I assume what you pay/receive in April?)? Most time single vs MFJ limits and brackets are double so you should see little change even if your salaries are the same.

If you sell your tax would be $600. Not sure I'd call that significant, but that's up to you. Short of getting to the 15% bracket in 20 years you can't avoid this anyway.

[Spork]

FWIW: I hold about 10% of my financial assets (i.e, ignoring house, etc) in individual stocks.  Like you: mine have been mostly buy and hold and hold and hold.  Many were extremely lucky picks and most of my bad picks over time have been disposed of.  My returns have historically been slightly better than index funds, but I absolutely, positively attribute this to dumb luck rather than financial genius.

For me, this keeps things slightly more interesting.  While it's not the route I'd advise people to follow, there is no real "sin" in keeping a small slice of your portfolio in individual  stocks. 

I'm making the assumption here that you also own index funds.  (That could be wrong.)  But given that assumption, I don't even see a problem with you (slowly) expanding your individual shares over time -- but keeping them low in proportion to the rest of your portfolio.

[Retire-Canada]

Basically my question is, should I sell and reinvest these via Betterment, or is holding an OK strategy? I'm also concerned about the tax implications of selling, as I'd have to pay capital gains on the increases. At 15% that could be pretty significant, and could take awhile to grow out of that loss via mutual funds. I'm expecting a tax bill increase this year post combining incomes with my future wife. We both make decent middle to upper middle class professional salaries.

Unless holding those particular stocks in those particular quantities is part of your investment plan I would sell them and invest the money according to your investment plan/asset allocation.

Not so much because it's a problem that needs to be solved for financial planning reasons, but more because why spend the mental energy thinking about those stocks vs. simplifying your investments and never having to think about it again?

If you want to keep them go for it. It won't make much if any difference to your financial future given the $$ value in question relative to your incomes/savings rate.

[MoneyStubble25]

At 15% that could be pretty significant, and could take awhile to grow out of that loss via mutual funds. I'm expecting a tax bill increase this year post combining incomes with my future wife. We both make decent middle to upper middle class professional salaries.

If both your withholding are set up right why would your tax bill change (I assume what you pay/receive in April?)? Most time single vs MFJ limits and brackets are double so you should see little change even if your salaries are the same.

If you sell your tax would be $600. Not sure I'd call that significant, but that's up to you. Short of getting to the 15% bracket in 20 years you can't avoid this anyway.

Good point on the 15% now or later. I was thinking in terms of paying the tax post FI when we are in a lower bracket, but that won't really apply.

We've run the numbers (my future wife is an accountant) and in total we will owe a few extra thousand dollars in income taxes. Basically, with deductions I haven't been paying at the 28% tax bracket even with gross income breaking that threshold, but with our combined incomes, a greater portion of both our combined incomes will be taxed at 28%. For example, a single earner making 100K net would pay 28% on 9K, but two married people each making 100K would be paying 28% on close to 50K in income. So really, it's not going up that much, and we are covered in our with-holdings, but we are going from getting a refund of a few grand combined to getting essentially nothing back. The marriage tax brackets really do not favor dual earners with good salaries. Not to be a complainy pants here, we are very fortunate, but it's hard to love paying more in taxes just because you tied the knot.