Author Topic: What to do with a few older stock accounts  (Read 4272 times)

Exprezchef

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What to do with a few older stock accounts
« on: June 20, 2014, 08:16:20 AM »
My wife and I am trying to get a better handle on our overall portfolio and I have a few older "stock only" accounts that we want to re-allocate to get better returns. There is a Morgan Stanley account valued at 53K and an E-trade account valued at 19K. Both are fully comprised of just Qualcomm (QCOM) stock and a little bit of cash.  While we have been getting steady mild returns with dividend payouts over the years, I think we can do better. They are just a small portion of our overall portfolio. I would like to explore re-allocating the money into something more diversified. We don't add any further money into those accounts and they just sit there. I was thinking of dividing the money up into the "three fund" approach to become more diversified. What do you guys think and what would you do?     

milesdividendmd

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Re: What to do with a few older stock accounts
« Reply #1 on: June 20, 2014, 09:10:09 AM »
It will likely never be cheaper than now to take the tax hit.

But if your shares are very appreciated you might consider strategy number 5.

https://www-1000.aig.com/TridionData.do?Page_ID=68178



AssetGrinder

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Re: What to do with a few older stock accounts
« Reply #2 on: June 20, 2014, 10:41:08 AM »
I would sell that qualcomm stock right away.Or u can leave a small piece of it . Lets say like 5k.

The rest I would either spread out in 10 blue chip dividend paying stocks or 2-3  broad dividend ETFs

All depends what other stock you are holding in your main account.

Ask yourself a few questions about your overall portfolio.

1. Are you globally diversified?
2. Are you too heavy in certain sectors like your quallcom stock?

For a 3 fund approach pending you are in the states you could hit up a US fund for 50%, Europe or all world fund for 35% and an emerging markets fund for 15%. Shop around for the lowest mers and you should be set. Best of luck!

matchewed

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Re: What to do with a few older stock accounts
« Reply #3 on: June 20, 2014, 10:42:31 AM »
I'd sit down and construct an Investment Policy Statement which will outline how your investments support your goals. Then do with that money as dictated by that.

mrgrump

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Re: What to do with a few older stock accounts
« Reply #4 on: June 22, 2014, 12:14:10 AM »
We currently have a 60/20/10/10 split among VTI, VEU, BND, VNQ. Total US Market/World market ex-US/total bond market/REIT. We also invest $100 a month into loyal 3 purchasing MCD, KO, BRKB, BKW, DPS, YUM, PEP, BUD, SBUX and DNKN at $10 each and I have held onto exactly 100 shares of Ford. Logic being, The Ford shares serve as a reminder to me to hold everything long term like Buffet. Loyal3 lets me play around but avoids fees so I still have the "excitement" of picking my own stocks and the ETFs the absolute majority money avoids fees, is easily tradeable and is rather safe in owning nearly everything in the world. It works for us

Joel

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Re: What to do with a few older stock accounts
« Reply #5 on: June 22, 2014, 10:41:05 AM »
Sell. Buy index funds.

Exprezchef

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Re: What to do with a few older stock accounts
« Reply #6 on: June 22, 2014, 10:34:10 PM »
Thanks to those who replied. It was all excellent advice.  I will make the changes this week.

johnhenry

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Re: What to do with a few older stock accounts
« Reply #7 on: June 25, 2014, 07:53:38 AM »
Sell. Buy index funds.

Agreed.  The only thing I would add that hasn't been mentioned is to consider your current tax bracket and whether or not you plan to have a fully retired or semi-retired low-income year in the very near future that would put you in the 10 or 15% tax bracket for that year.

If you are in a tax bracket above the the 15% bracket, you'll pay capital gains tax on the gains realized when you sell to re-buy index funds.  If you can manage to incur those gains in a year where you are in the 15% or lower bracket, you'll avoid all tax on the gains. 

Capital gains (LT) tax is not marginal like income tax.  You either pay 0% or 15%.  So if you see an opportunity to realize gains at 0% in the very near future, you can work that into your plans.


Joel

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Re: What to do with a few older stock accounts
« Reply #8 on: June 25, 2014, 08:49:49 AM »
Actually capital gains taxes are marginal. If you are near the end of a tax bracket you could be hit with the capital gains tax rate of 15% and the marginal tax rate on your ordinary income. So be careful. It could be worth selling the stock and living off of it and increasing your retirement contributions depending on your tax situation.

johnhenry

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Re: What to do with a few older stock accounts
« Reply #9 on: June 25, 2014, 12:20:37 PM »
Actually capital gains taxes are marginal. If you are near the end of a tax bracket you could be hit with the capital gains tax rate of 15% and the marginal tax rate on your ordinary income. So be careful. It could be worth selling the stock and living off of it and increasing your retirement contributions depending on your tax situation.

I thought long term capital gains were taxed at 0% for those in the 10 or 15% bracket and taxed at 15% for those in all other brackets.  Is that not the case?

It's my understanding that the brackets themselves are marginal, but the capital gains tax itself is not.  You either completely avoid or incur the tax based on which bracket you wind up in.  Which is exactly why it's important to plan carefully to ensure your taxable income puts you in the appropriate bracket if capital gains tax harvesting is part of your strategy.
« Last Edit: June 25, 2014, 12:30:48 PM by johnhenry »

Joel

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Re: What to do with a few older stock accounts
« Reply #10 on: June 25, 2014, 11:33:33 PM »
Actually capital gains taxes are marginal. If you are near the end of a tax bracket you could be hit with the capital gains tax rate of 15% and the marginal tax rate on your ordinary income. So be careful. It could be worth selling the stock and living off of it and increasing your retirement contributions depending on your tax situation.

I thought long term capital gains were taxed at 0% for those in the 10 or 15% bracket and taxed at 15% for those in all other brackets.  Is that not the case?

It's my understanding that the brackets themselves are marginal, but the capital gains tax itself is not.  You either completely avoid or incur the tax based on which bracket you wind up in.  Which is exactly why it's important to plan carefully to ensure your taxable income puts you in the appropriate bracket if capital gains tax harvesting is part of your strategy.

Capital gains count as taxable income. Think of your long term capital gains and qualified dividends as the top layer of your income. (or the last dollar you earn, per say). If your total taxable income is in the 15% tax bracket, all of those long term capital gains are at a 0% tax rate. If your total taxable income is above the 15% tax bracket by an amount greater than your long term gains, all of those long term gains will be taxed at 15%.  If your total taxable income is above the 15% tax bracket, but your long-term gains are less than the amount you are above the 15% tax bracket, only those long-term gains that are above the 15% tax bracket are taxed at 15%, while the long-term gains below the 15% tax bracket are taxed at 0%.

It is not an all or nothing type of thing. Long-term capital gains count as taxable income, and can push you into the next marginal tax bracket. Which is especially critical for someone bordering the 15% and 25% tax brackets. You can actually have a 30% marginal tax rate because each additional dollar of ordinary income is taxed at 15% and it causes an additional long-term capital gain dollar to be taxed at 15% as well.

johnhenry

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Re: What to do with a few older stock accounts
« Reply #11 on: June 26, 2014, 08:46:33 AM »
Joel,

  Thanks for the clarification.  I was aware that the capital gains counted as taxable for figuring the tax bracket, but was not aware that some capital gains for the year would be taxed at 0% and the rest at 15%.  Good info.  Good advice.