Investment Advice

[kenzembo1]

I'm not a frequent contributor, however, I thought the kind, more investment savvy regulars could chime in and offer their advice in light of my situation ...

I inherited a fair amount of stock from a recently deceased elder family member. It is very conservative blue chip stock, which I believe was meant to generate income in the form of quarterly dividends to supplement her pension and social security up until the time of her death in March of 2016.

The breakdown and cost basis (value at the time of death) of each is as follows:

- 1,500 shares of General Electric (GE) @ $31.02 = $46,537.50
- 376 shares of Exxon Mobil (XOM) @ $83.92 = $31,556.55
- 250 shares of Proctor & Gamble (PG) @ $82.97 = $20,742.50

Total = $98,836.55

Unfortunately, a civil dispute kept me from collecting these assets until very recently and as many of you know, the market has not been kind to General Electric (in particular).

For reference, the current values (as of November 30th) are:

- 1,500 shares of GE @ $18.29 = $27,435 (-$19,102.50)
- 376 shares of XOM @ $83.29 = $31,317.04 (-$239.51)
- 250 shares of PG @ $89.99 = $22,497.50 ($1,755)

Total = $81,249.54

Now, I'm 31 years old with a good job and have a company matched Roth 401K and independent Roth IRA (and take advantage of the full $5,500 annual contribution). I have an emergency fund (3-6 months expenses liquid) and my only debt is my mortgage which I hope to pay off in the next 5 years. In other words, I don't really need the money and would like to keep it invested albeit transition it to more aggressive growth type mutual funds (A shares, non-managed) for a better long-term return.

My only concern is when to sell as I would currently absorb an estimated $17,587.01 loss. Thus, my question to you all of you is, in your honest opinion, what would you do if you were in my shoes?

I realize I can spread the loss out over 5 years, but realistically would only net an estimated $1,500-$2,000 in tax refunds over that time, or approximately 10% of the total loss. I hate the idea of selling "low" and am not in any major hurry, but am considering the opportunity cost (compound interest that would have otherwise been generated) associated with this decision as well.

Sorry for the long post, I appreciate your help!

[tamiya]

Don't bother timing the market, even a pro that does it for his daily crust is more getting lucky than he'd care to admit.

If you don't have market exposure & you're happy to buy/hold those same shares today, then it's fine to just hangon. Unless you've got a better investment to make? That's the real Opportunity Cost; the past fall is already sunk long gone = worrying won't do squat.

No idea on tax implications in your country nor inheritance complications, best check what's the "acquisition cost" of the stock - is it date of original purchase or date of probate etc etc. it'll affect your capital gains calcs I'd imagine.

[ejvette]

I've always been a huge fan of GE I finally just had to bail the current management is destroying the company its really never been the same since Jack Welch retired. Any way for a guy your age sell off all of it put into 3 index funds a US stock/International stock/global bond and forget about it for 30 years. (rebalance annually) I wish I had done that at your age. Google Jack Bogle and read his investment philosophy its a no-brainer its simple it works. JMHO.

[MrInternational]

Lots of intelligent thoughtful folks here who have done well with money. However you really ought to seek advice from a professional. My point of view on Considerations... diversification is good, three or four stocks are a very small number - don’t know if your portfolio would call 80-100K large or small but seems a good idea to spread the investment further, you have no losses as you didnt pay anything for the stock, don’t worry about a short term loss anyway because you have decades to go before you need the cash. Good luck!


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[rolex75216]

I would vote for more diversification. The amount of time you will spend trying to beat the market will not be worth the potential returns that investing in a simple diversified portfolio of market index funds would yield to you. Stop watching the market, trying to time precise entry and exit points based off of charts and technical indicators like overbought / oversold, Fibonacci's, etc... Work hard, save as much as you can, invest it in low cost index funds, acquire a good solid skill set, and you will retire with millions. If you are unhealthy the money means nothing. Take care of your health!

[powerfunk]

Originally Posted by kenzembo1

My only concern is when to sell as I would currently absorb an estimated $17,587.01 loss.

No you wouldn't. In my opinion you only "absorb" a loss if you liquidate for less than you paid. You still have the same number of shares you always had. The price at the time of her death is not relevant. The only thing that's relevant is: Do you think GE will go down or up? If you think it's going to perform poorly, sell it. If you think it will perform well, keep it. And, when in doubt, do nothing. Just my 2 cents, sorry for your loss and good luck

[mschafer]

Buy what you know and understand. Don't worry about absorbing loss, it's not a loss to you but a net gain. If in the US market look at SP Dividend Aristocrats for ideas. And yes, I would broaden my investments to 30-50 holdings (if you can keep track of them)
Also, if you feel the market is not going that much further, reducing debt is always a good idea.

[keschete]

My best advice is to find a highly recommended financial advisor. You should be fairly high to medium risk in your 30’s. If you keep contributing and have a good financial advisor you can have enough money to retire without worrying about anything. At 47 and my husband at 51 have actually exceeded our retirement goal. We are still contributing, but we are where we need to be. We aren’t even planning on actually retiring. We will both probably continue to work as long as we can. And quit looking at your statements. I look at them on occasion and let my financial advisor do what he does.

[AzPaul]

The market, as a whole, has been rising rather dramatically, while one of your holdings has been slipping rather dramatically. Tells you quite a bit about the company in question.

[swils8610]

You’ve got to know when to hold em...know when to fold em...know when to walk away and know when to run...

Kenny Rogers


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[cruise_bone]

Hold GE and sell the other too and Diversify.

[azguy]

I'm a retired financial advisor, those stocks s*ck. Sometimes the worst trade is the no-trade. Sell them ASAP and buy high quality names like Google, Amazon, Adobe, Visa, MasterCard, FedEx, UPS, Home Depot, ADP, Facebook, Apple, etc.

By the way, your cost basis is the day of death, since this is more than likely a taxable account you can use the losses against gains in the new portfolio. It's still $80k you didn't have, don't be greedy about the losses and move on to something you can keep, own and will appreciate.

Find 20 stocks you like, I gave you 11 and put 5% in each one when it gets to 7.5% of the portfolio sell it back down to 5%.

several more, Wells Fargo, Chase, John Deere, Tesla, semi-conductor ETF SMH, Aero and defense ETF ITA, Expedia, Costco and Walmart.

Good luck

[beshannon]

Originally Posted by azguy

I'm a retired financial advisor, those stocks s*ck. Sometimes the worst trade is the no-trade. Sell them ASAP and buy high quality names like Google, Amazon, Adobe, Visa, MasterCard, FedEx, UPS, Home Depot, ADP, Facebook, Apple, etc.

By the way, your cost basis is the day of death, since this is more than likely a taxable account you can use the losses against gains in the new portfolio. It's still $80k you didn't have, don't be greedy about the losses and move on to something you can keep, own and will appreciate.

Find 20 stocks you like, I gave you 11 and put 5% in each one when it gets to 7.5% of the portfolio sell it back down to 5%.

several more, Wells Fargo, Chase, John Deere, Tesla, semi-conductor ETF SMH, Aero and defense ETF ITA, Expedia, Costco and Walmart.

Good luck

Completely agree. I too am a former CFP and series 7 broker.

We do not know enough about your situation to give more than general advice.

That money could be better invested in things that meet your goals and align with your strategy. Don't fall in love with a stock or let a tax situation decide for you.

GE is dead money and will be for the foreseeable future.

The others are mired in legacy markets.

I agree with some of the trade ideas mentioned above.

[Lordofrolex]

A financial advisor would be best in this situation. If i was you i would probably not do anything for about a year see what happens with the GE stock. Not sure how aggressive you want to be but i'm currently in the stock market with a fairly new type of investment. Ive only been in it for about 2 months but I've already made 22%. I don't think they are long term type of companies but for the next couple of years I'm expecting to see at least 300% on my investment. Message me if you want the 411.

[uansari1]

Originally Posted by ejvette

I've always been a huge fan of GE I finally just had to bail the current management is destroying the company its really never been the same since Jack Welch retired. Any way for a guy your age sell off all of it put into 3 index funds a US stock/International stock/global bond and forget about it for 30 years. (rebalance annually) I wish I had done that at your age. Google Jack Bogle and read his investment philosophy its a no-brainer its simple it works. JMHO.

I agree with ejvette. You don’t need individual securities. Liquidate and buy a diversified set of index funds. I’d personally weight it more for the international developed and emerging markets, then rebalance annually.

If you want a very simple set it and forget it model, just stick it into a Betterment of Wealthfront account and check back in after a decade.

[rfatm3f]

If he sells, isn’t he going to have to pay capital gains tax for any profit over what she originally paid?

[CamSLC]

Originally Posted by rfatm3f

If he sells, isn’t he going to have to pay capital gains tax for any profit over what she originally paid?

No his cost basis is the value on the day of passing from the grantor.

I would echo what others have said. Dump those now and get into a more diversified etf/mf portfolio with an appropriate risk tolerance to your age and expectations of needing to use these funds in the future.

Or blow it on a watch

[Wcdhtwn]

Originally Posted by rfatm3f

If he sells, isn’t he going to have to pay capital gains tax for any profit over what she originally paid?

No. Cost basis adjusts for the new owner to the price of the security on the date of the original owners death.

[George Burdell]

Since I can't predict the future, I would suggest a buy or sell call. You're super fortunate to have such a kind relative, though, and you're getting a head start over the pack with that gift.

If you do decide to sell and don't want to hire a CFP or pick new investments, you may consider something like a robo advisor to help with capital allocation and risk management. The large brokerages offer them. Schwab has one for example that is free of charge, starts with a profile of your goals and risk tolerance levels, and then monitors and rebalances your portfolio across a diversified mix of exchange traded funds. It delivers market returns with good diversity and little to no effort.

Good luck! The relative obviously thought highly of you.

[RW16610]

Originally Posted by azguy

I'm a retired financial advisor, those stocks s*ck. Sometimes the worst trade is the no-trade. Sell them ASAP and buy high quality names like Google, Amazon, Adobe, Visa, MasterCard, FedEx, UPS, Home Depot, ADP, Facebook, Apple, etc.

By the way, your cost basis is the day of death, since this is more than likely a taxable account you can use the losses against gains in the new portfolio. It's still $80k you didn't have, don't be greedy about the losses and move on to something you can keep, own and will appreciate.

Find 20 stocks you like, I gave you 11 and put 5% in each one when it gets to 7.5% of the portfolio sell it back down to 5%.

several more, Wells Fargo, Chase, John Deere, Tesla, semi-conductor ETF SMH, Aero and defense ETF ITA, Expedia, Costco and Walmart.

Good luck

I'm on board with this advice provided above

[Etschell]

take the loss if you dont like the holdings. you are still 81k ahead of the game.

put some 3% in crypto currencies. the rest in bonds, stocks and cash.

[brandrea]

i can't believe this. Here we are on TRF and no one's suggesting you liquidate the stocks and use the money to by a nice bunch of Rolex