Author Topic: Sell off individual stocks or sit on them?  (Read 2578 times)

birdman2003

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Sell off individual stocks or sit on them?
« on: April 29, 2014, 03:26:29 PM »
So last year before I got wise, I thought I could time the market and bought some individual stocks using money from an individual brokerage account and my HSA.  I realize that trying to time the market is pretty much impossible, but what do I do now?

Here are the details of my investments:
Stock   Cost Basis   Market Value   Date Purchased   Account   
A1$490$630March 2013Individual
A2$510$660March 2013Individual
A1$490$630March 2013HSA
A2$510$660March 2013HSA
A3$510$610March 2013HSA

We are talking very small gains here, so I don't think liquidating vs keeping them will make a huge difference.  I don't need cash immediately for anything.  I was thinking of keeping the HSA stocks but selling the ones in my individual brokerage account.

Any advice?

MDM

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Re: Sell off individual stocks or sit on them?
« Reply #1 on: April 29, 2014, 03:39:48 PM »
Strictly personal preference here, but for individual stocks I'd suggest avoiding
1) Many small holdings (due to the recordkeeping hassle and minimal upside), and
2) A very few very large holdings (due to the risk of individual failure).

If, after investing the bulk of your money in diversified index funds you have some mediumish amount of money and want to try your luck at a few individual stocks, then go for it.

As your holdings seem to fall into category #1 above, I'd sell them.  But it's not a big deal either way.

milesdividendmd

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Re: Sell off individual stocks or sit on them?
« Reply #2 on: April 29, 2014, 07:45:33 PM »
The only way to really answer this question is for you to calculate your "intrinsic value" for each of the companies that you are invested in and to compare it to the expected return for your prospective index funds.  If the expected return on your individual stocks is greater than your expected return on your index fund after taking into account the amount that will be lost to capital gains in the conversion, then you should just let it ride.

In general I'm a big believer in getting all of your funds into index funds in order to avoid uncompensated risk (risk that can be diversified away and for which you do not expect to receive a risk premium (more expected returns.))

Also since stocks tend to go up over time, the conversion will likely never be cheaper than now.

SO unless you really want to become a value investor, you're probably better of paying the capital gains and getting your money into a cheap index fund.

Alexi


milesdividendmd

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Re: Sell off individual stocks or sit on them?
« Reply #3 on: April 29, 2014, 07:49:32 PM »
The other point is that you will not have to pay any capital gains on the conversion of the stocks in your HSA, so that's a no brainer...

Alexi

clifp

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Re: Sell off individual stocks or sit on them?
« Reply #4 on: April 30, 2014, 12:28:43 AM »
Strictly personal preference here, but for individual stocks I'd suggest avoiding
1) Many small holdings (due to the recordkeeping hassle and minimal upside), and
2) A very few very large holdings (due to the risk of individual failure).

If, after investing the bulk of your money in diversified index funds you have some mediumish amount of money and want to try your luck at a few individual stocks, then go for it.

As your holdings seem to fall into category #1 above, I'd sell them.  But it's not a big deal either way.

I agree. The only practical way to achieve decent diversification when you are young/don't have a lot of capital is with ETFs or index funds and at least 80-90% of your saving should be directed into that.
After that than I can see benefits for trading individual stocks, since I believe the mental exercise of buying or selling gives a you a better understanding of the market as whole.
Even when I was young I tried to trade in only round lots, or maybe 40 or 50 shares for stocks trading at $50+/share, so my typical purchase were $2,000 to $3,000.  Now trading costs are smaller now days so maybe you can cut that in figure in 1/2.   For a young person/beginning investor I'd rather see them spend the time to carefully evaluating one or two stocks a year from your early 20s until your early 30s than deal with five.

So my questions is much less about the money or taxes but rather.  Did you learn something about the market/stocks by purchasing this individual issues? and did you enjoy the challenge of picking stocks? If the answer to both is yes than keep them, if the answer is no then sell them, and if you are the fence well give it a year.

birdman2003

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Re: Sell off individual stocks or sit on them?
« Reply #5 on: April 30, 2014, 03:49:26 PM »
Thanks everyone.