Author Topic: Should I sell of my underperforming investments  (Read 4359 times)

dragonwalker

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Should I sell of my underperforming investments
« on: December 31, 2015, 12:45:40 AM »
This is where I'm at financially:

Cash savings: ~$39K
Apple: market value ~79K
Citibank: ~7K
BAC:~$600
Gold SPDR:~2K
401K:~$54K (S&P 500 Index)

Overall Apple is up about 13%, Citibank up 15%, BAC down 92%, Gold down 40%, 401K YTD basically flat.

I had BAC since the Countrywide days and selling it will allow me to write off $3,500. I've had the gold for a few years and selling it would yield a loss of about $2,000. I hear that gold is going to go for another nosedive next year when interest rates might continue to rise. I just don't see any hope that it will recover any time soon. I'm thinking of just selling and moving on. Do you guys think that is reasonable? I haven't traded anything this year so the loss will offset my ordinary income which is in the 25% bracket.  I was considering selling BAC but I believe I can only write off $3,000 in capital gains losses every year and I might save it for a year where I have short term capital gains to write it off against.

Anyone have any suggestions or advice in general?

I am contemplating putting some of the cash into some Vanguard index fund as seems popular...but I already have my entire 401K in that so should I be putting more eggs in the basket...

humblefi

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Re: Should I sell of my underperforming investments
« Reply #1 on: December 31, 2015, 01:02:24 AM »
A couple of points are not clear to me. So, let me ask some questions which may shed more light on the question

1.
It seems like you are talking about tax loss harvesting. To write the losses off, one has to have Realized capital gains. Where are the capital gains coming from? I.e. are you also going to sell your appreciated stocks (apple, etc)

2.
Are you going to buy back the stocks where you lost money via harvesting sales?  Same question for stocks where you made money.

Without answers to the above two questions, it is not possible to give a reasonable answer. Please clarify.

MDM

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Re: Should I sell of my underperforming investments
« Reply #2 on: December 31, 2015, 01:23:23 AM »
It seems like you are talking about tax loss harvesting. To write the losses off, one has to have Realized capital gains.
That is not correct.  You may deduct up to $3,000/yr of net capital losses, and carry forward any higher losses to future tax years.  Yes, capital losses will first offset capital gains, but if there are no capital gains (or the capital losses exceed the capital gains) the capital losses offset ordinary income.

MDM

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Re: Should I sell of my underperforming investments
« Reply #3 on: December 31, 2015, 01:30:22 AM »
Anyone have any suggestions or advice in general?

I am contemplating putting some of the cash into some Vanguard index fund as seems popular...but I already have my entire 401K in that so should I be putting more eggs in the basket...
Common advice for those with losses in individual stocks is
1) Ask yourself "would I buy the stock now if I didn't own it?" 
3) Take the answer to question #1 and do the opposite for the question "should I sell it now?"
Up to you....

"Vanguard index fund" covers many possibilities.  Some of those (e.g., VTSMX) come with very large baskets that can hold many eggs before being overfilled.  You could look at https://www.bogleheads.org/wiki/Three-fund_portfolio for some thoughts.

electriceagle

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Re: Should I sell of my underperforming investments
« Reply #4 on: December 31, 2015, 02:21:25 AM »
Start by determining your target asset allocation. Then, determine whether these stocks fit your asset allocation. If they don't fit, sell them off.

BTW, most people here would frown at holding most of your money in individual stocks. They would recommend that you allocate your assets between major Vanguard funds like Total Stock Market, Intermediate Bond and World ex-US.

dmn

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Re: Should I sell of my underperforming investments
« Reply #5 on: December 31, 2015, 04:21:22 AM »
Do I understand you correctly that you hold 79000$ of Apple stock? That is ridiculolusly risky. Individual stocks, even of well-known and respected companies, can lose most of their value very rapidly.

If you hold individual stocks, each of them should be only a very small part of your portfolio.

Quote
I am contemplating putting some of the cash into some Vanguard index fund as seems popular...but I already have my entire 401K in that so should I be putting more eggs in the basket...

That is not putting all your eggs in one basket, as the index is basically equivalent to splitting your money amongst hundreds of individual stocks. Even if several top companies go bankrupt, your index fund will retain most of its value because you have hundreds of companies left. In this sense, investing all your money in a total market index fund (possibly including some international exposure) is the safest form of stock market investing - basically the opposite of what you do with Apple.

humblefi

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Re: Should I sell of my underperforming investments
« Reply #6 on: December 31, 2015, 06:41:56 PM »
It seems like you are talking about tax loss harvesting. To write the losses off, one has to have Realized capital gains.
That is not correct.  You may deduct up to $3,000/yr of net capital losses, and carry forward any higher losses to future tax years.  Yes, capital losses will first offset capital gains, but if there are no capital gains (or the capital losses exceed the capital gains) the capital losses offset ordinary income.

Good catch. I stand corrected. I assumed an exchange...op may not have that in mind. Thanks.

rmendpara

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Re: Should I sell of my underperforming investments
« Reply #7 on: January 01, 2016, 05:28:06 PM »
This is where I'm at financially:

Cash savings: ~$39K
Apple: market value ~79K
Citibank: ~7K
BAC:~$600
Gold SPDR:~2K
401K:~$54K (S&P 500 Index)

Overall Apple is up about 13%, Citibank up 15%, BAC down 92%, Gold down 40%, 401K YTD basically flat.

I had BAC since the Countrywide days and selling it will allow me to write off $3,500. I've had the gold for a few years and selling it would yield a loss of about $2,000. I hear that gold is going to go for another nosedive next year when interest rates might continue to rise. I just don't see any hope that it will recover any time soon. I'm thinking of just selling and moving on. Do you guys think that is reasonable? I haven't traded anything this year so the loss will offset my ordinary income which is in the 25% bracket.  I was considering selling BAC but I believe I can only write off $3,000 in capital gains losses every year and I might save it for a year where I have short term capital gains to write it off against.

Anyone have any suggestions or advice in general?

I am contemplating putting some of the cash into some Vanguard index fund as seems popular...but I already have my entire 401K in that so should I be putting more eggs in the basket...

What you do with Citi, BAC, and gold is essentially meaningless to your overall portfolio unless you find a clear strategy for how to go ahead with holding AAPL at $79k. Unless you work there and this is accumulated stock, you are speculating in a very risky way... so I'm not sure anyone's advice here is really useful given few people can intelligently advise on a trading portfolio... though many can offer advice on long term investing.

Ohio Teacher

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Re: Should I sell of my underperforming investments
« Reply #8 on: January 01, 2016, 06:51:49 PM »
I am contemplating putting some of the cash into some Vanguard index fund as seems popular...but I already have my entire 401K in that so should I be putting more eggs in the basket...
You have $79K in one basket, but are worried about putting more than $54K divided among 500 baskets.  Even listing the pittance in BAC and Gold is a distraction.  I hope you sold the Gold and BAC for a loss yesterday for your 2015 taxes.

Going forward, I would decide on a strategy to unwind the AAPL and buy VTSAX.  Some here would argue in favor of a lump sum sale/buy, but not everyone can handle that.  I guess it's important to know how you came into owning such a significant amount in one stock in the first place to understand how to proceed. 

Kaspian

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Re: Should I sell of my underperforming investments
« Reply #9 on: January 04, 2016, 09:10:56 AM »
The question is--would you buy the same investments again?  If the answer is, "Hell, no!," then get rid of them.  ...Because asking whether to sell or buy more is the same question only phrased differently.  If you choose not to sell, it means you expect a huge % recovery.  ...And if that's the case, why wouldn't you buy more?

Mr.Tako

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Re: Should I sell of my underperforming investments
« Reply #10 on: January 04, 2016, 06:39:29 PM »
Just some simple advice for investing in common stocks:

Ignore for a moment what price Mr. Market is quoting you.  You own a business.  Absent Mr. Markets price, how would you value the business?  How well is that business allocating capital?  Is the business earning superior returns on equity to the market?

If you can't answer questions like that, you have no business being in individual stocks.  (Pun intended)