Author Topic: Selling individual stocks and buying index funds process  (Read 5753 times)

turning_hapanese

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Selling individual stocks and buying index funds process
« on: December 28, 2014, 12:42:47 PM »
Hello MMMer's,

MMM noob here, but loving the community so far! After looking at my portfolio, I realize that I have way too much money invested in individual stocks. Here's a quick breakdown:

Sharebuilder account
  • AINV - $2675
  • GE - $2739
  • T - $3083
  • TSLA - $8473
  • VTI - $7308

USAA Account
  • BA - $3290
  • TSLA - $3189
  • USBSX - $3175

I also have about $40K in a Roth IRA 2040 Lifecycle fund at USAA and $43K in a TSP. I mostly picked up these stocks for dividends and they've been doing fine so far. I took a gamble on Tesla and it's paid off so far, but it's been very volatile so it's the riskiest thing in my portfolio. As far as the future goes, should I just sell off all my individual stocks and start diving into index funds? Should I open up a Vanguard account? Where do I even begin? Thanks in advance for any suggestions!

Guffeyjon

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Re: Selling individual stocks and buying index funds process
« Reply #1 on: December 28, 2014, 01:29:34 PM »
What was your fee for purchasing through sharebuilder? $6.95? If that is so, I'd never purchase a stock with less then $2800 dollars; the fee on buy and selling will cost you 0.5% and I giving too much of my gain away just to purchase the stock. I'm not much into index or mutual funds as the research for them is much more difficult then with individual stocks.

turning_hapanese

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Re: Selling individual stocks and buying index funds process
« Reply #2 on: December 28, 2014, 01:50:44 PM »
Yes, the usual cost of purchasing a share is 6.95 but I usually do the automatic investing plan which allows you to make one purchase a month for $4.00. I thought the mantra behind MMM was index funds all the way?

AnonymousCoward

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Re: Selling individual stocks and buying index funds process
« Reply #3 on: December 28, 2014, 05:54:48 PM »
I was in a similar situation, I had a Roth IRA at USAA full of individual stocks and have since transferred it to Vanguard. You can transfer your IRA to Vanguard from anywhere easily, and you don't have to sell your shares beforehand. When you initiate the transfer you tell Vanguard the value of your holdings and what funds you want to invest in and they take care of it. You do this over the phone or online, I haven't ever called Vanguard but apparently they're very helpful.

Unfortunately that isn't what I did, I sold all of my shares before the transfer and had to eat the transaction fees. If I had called them I probably would have avoided that hassle :)

You have other options, you could sell your shares and buy index fund ETFs with your current custodians. I appreciate the simplicity of working directly with Vanguard though.

fartface

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Re: Selling individual stocks and buying index funds process
« Reply #4 on: December 30, 2014, 01:53:24 AM »
Hello MMMer's,

MMM noob here, but loving the community so far! After looking at my portfolio, I realize that I have way too much money invested in individual stocks. Here's a quick breakdown:

Sharebuilder account
  • AINV - $2675
  • GE - $2739
  • T - $3083
  • TSLA - $8473
  • VTI - $7308

USAA Account
  • BA - $3290
  • TSLA - $3189
  • USBSX - $3175

I also have about $40K in a Roth IRA 2040 Lifecycle fund at USAA and $43K in a TSP. I mostly picked up these stocks for dividends and they've been doing fine so far. I took a gamble on Tesla and it's paid off so far, but it's been very volatile so it's the riskiest thing in my portfolio. As far as the future goes, should I just sell off all my individual stocks and start diving into index funds? Should I open up a Vanguard account? Where do I even begin? Thanks in advance for any suggestions!

Blech -- I hate "Lifecycle" funds. There got that out right away.

I'd say rolling over your share builder and USAA holdings to Vanguard is a good move. We did this with our Etrade holdings. You don't have to sell everything -- just initiate a rollover/transfer from SB to Vanguard. The stocks will then be held in your Vanguard brokerage.

Me personally, I own AT &T and GE and a few others and just keep them in my VanG account in addition to my VanG index funds.

I'd probably dump Tesla and buy admiral shares of VDADX or VTSAX once I'm rolled over into VanG if I were you. Too lazy to look up your other holdings, but I'd' keep T and GE for their strong dividends...

wtjbatman

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Re: Selling individual stocks and buying index funds process
« Reply #5 on: December 30, 2014, 08:00:28 AM »
The big pain in the ass about doing a rollover from Sharebuilder to Vanguard is Vanguard will ask you to get a medallion signature guarantee before they approve the rollover. That literally turned me off so bad I decided to just leave my current tIRA at Sharebuilder. I'm invested in Vanguard index ETFs anyway, so no reason to rush and do the transfer.

Daisy

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Re: Selling individual stocks and buying index funds process
« Reply #6 on: December 30, 2014, 09:51:25 AM »
I am in a similar boat.

What are the pros and cons of moving over to Vanguard and investing in the mutual funds versus keeping it in ETrade and investing in Vanguard ETFs?

wtjbatman

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Re: Selling individual stocks and buying index funds process
« Reply #7 on: December 30, 2014, 09:57:14 AM »
I am in a similar boat.

What are the pros and cons of moving over to Vanguard and investing in the mutual funds versus keeping it in ETrade and investing in Vanguard ETFs?

The big Pro of moving to Vanguard is there are no transaction fees when buying and selling Vanguard funds. So you could buy $100 of VTSAX (or whatever) at a time and pay no transaction fees.

However that's not always a Con, depending on your brokerage. TD Ameritrade has 100+ commission free ETFs, including many Vanguard funds. Does Etrade have anything like that?

Daisy

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Re: Selling individual stocks and buying index funds process
« Reply #8 on: December 30, 2014, 09:59:19 AM »
I am in a similar boat.

What are the pros and cons of moving over to Vanguard and investing in the mutual funds versus keeping it in ETrade and investing in Vanguard ETFs?

The big Pro of moving to Vanguard is there are no transaction fees when buying and selling Vanguard funds. So you could buy $100 of VTSAX (or whatever) at a time and pay no transaction fees.

However that's not always a Con, depending on your brokerage. TD Ameritrade has 100+ commission free ETFs, including many Vanguard funds. Does Etrade have anything like that?

I haven't looked into ETrade's policies on that. I do have an IRA in Ameritrade though, good to know.

So would you suggest leaving it in Ameritrade and going the ETF route instead of moving to Vanguard?

wtjbatman

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Re: Selling individual stocks and buying index funds process
« Reply #9 on: December 30, 2014, 10:06:53 AM »
I mean honestly it's up to you. But I still have my Roth IRA at TD Ameritrade because of the available commission free ETFs. I see no reason to transfer my account. If one day TD Ameritrade stops offering commission free ETFs? Well then I would consider it.

I also like having the option of buying other funds or stocks, something that is more expensive at Vanguard (after the first 20 trades in a year) than at TD Ameritrade. But that's outside the scope of this discussion.

Daisy

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Re: Selling individual stocks and buying index funds process
« Reply #10 on: December 30, 2014, 10:13:02 AM »
I mean honestly it's up to you. But I still have my Roth IRA at TD Ameritrade because of the available commission free ETFs. I see no reason to transfer my account. If one day TD Ameritrade stops offering commission free ETFs? Well then I would consider it.

I also like having the option of buying other funds or stocks, something that is more expensive at Vanguard (after the first 20 trades in a year) than at TD Ameritrade. But that's outside the scope of this discussion.

Sounds reasonable. I didn't know the details of Vanguard accounts as you say. I like the flexibility of ETrade and Ameritrade and buying other things (gasp...did I admit that on this forum).

Oh well...

I just didn't know the difference between the Vanguard ETFs and mutual funds, how dividends and capital gains within the fund are handled, etc.

wtjbatman

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Re: Selling individual stocks and buying index funds process
« Reply #11 on: December 30, 2014, 10:30:04 AM »
I just didn't know the difference between the Vanguard ETFs and mutual funds, how dividends and capital gains within the fund are handled, etc.

If you're buying and selling them in tax-advantaged accounts (like the IRA you mentioned), then there's effectively no difference. Just have the dividends reinvested (if you want more of the same funds of course) and then no worries.

In a taxable account there are some small differences with capital gains within the fund. Generally ETFs are considered more tax-efficient if held in taxable accounts. As for dividends, I wouldn't have them automatically reinvested, as that would create future issues with tax lots and tax loss harvesting. I'd just let the dividends accumulate along with my contributions until I reinvest.

LordSquidworth

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Re: Selling individual stocks and buying index funds process
« Reply #12 on: December 30, 2014, 10:36:32 AM »
Hello MMMer's,

MMM noob here, but loving the community so far! After looking at my portfolio, I realize that I have way too much money invested in individual stocks. Here's a quick breakdown:

Sharebuilder account
  • AINV - $2675
  • GE - $2739
  • T - $3083
  • TSLA - $8473
  • VTI - $7308

USAA Account
  • BA - $3290
  • TSLA - $3189
  • USBSX - $3175

I also have about $40K in a Roth IRA 2040 Lifecycle fund at USAA and $43K in a TSP. I mostly picked up these stocks for dividends and they've been doing fine so far. I took a gamble on Tesla and it's paid off so far, but it's been very volatile so it's the riskiest thing in my portfolio. As far as the future goes, should I just sell off all my individual stocks and start diving into index funds? Should I open up a Vanguard account? Where do I even begin? Thanks in advance for any suggestions!

What's your tax bracket?

I'm assuming all those stocks are now long (held for one year or more)?

Guffeyjon

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Re: Selling individual stocks and buying index funds process
« Reply #13 on: December 30, 2014, 08:27:29 PM »
Index investing is probably the preferred method of investing on this site, but in my opinion if you like the do company research, track your performance, balance your own portfolio, ect then in the long term you're better off learning how to invest in stocks personally. Every year that you work at it (as long as you enjoy doing the work and actually do it) then you will get better, and sure there will always be some fund somewhere that does better then you, but you'll be able to find ones that did worse as well.

Best advice is to not think you'll turn 10k into 100k in a year by picking the newest/greatest/ most overlooked stock. Get rich slowly.

turning_hapanese

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Re: Selling individual stocks and buying index funds process
« Reply #14 on: January 01, 2015, 12:16:37 PM »
@LordSquidworth

I'm in the 15% tax bracket currently (Air Force E-5). Just out of curiousity, what is the importance of my tax bracket in this situation?

Yes, all the stocks are now long.

I will admit that the allure of picking a "winner" stock is strong, I think my gut tells me I'm not a fan of the volatility of individual stocks. Like I said, I got really lucky with Tesla, but now I don't know if I should accept my little victory, sell, and shift towards index funds or just keep things as they stand (I'm a big fan of Telsa). Ultimately, I'm just trying to find the best solution to branching out to the Mustachian way of investing. Any guidance is appreciated.