New Self Management Stock Suggestions

[savory]

Hi,

I have taken over the management of 2 accounts from advisers mainly to reduce fees. Both accounts were all individual stocks and bonds, no funds. One is an IRA and the other is a regular investment account. My key issue is the regular investment account due to the tax consequences.

My plan is to set up a 3 fund or so lazy portfolio using low cost mutual funds/ETFs. However, in my regular investment account, I have some holding with significant capital gains. They are all large cap stocks; companies that we are all familiar.

I have no problem holding onto these 25 stocks, or at least the ones with large capital gains but I am not sure how to analyze my existing portfolio to see if that is the best thing to do. If I sold, I would buy Vanguard VTI.

Any tools/thoughts you would suggest to make this decision? Let me know if you need more information.

Thanks

 

[travelover]

The amount of capital gains you'd owe depends on your total taxable income. If it is currently low, you could trade out the individual stocks with minimal penalty.

Beyond that, do you have an asset allocation - i.e. percent stocks and bonds that you desire to hold? If so, apply that across both accounts.

 

[bingybear]

First I would have done my plan before ripping the accounts away . I'm assuming that you were happy with your FA performance, just not the cost.


You say you have high embedded capital gains... how high? you talking how high (ball park) 10's of thousands? 100's of thousands? or where?


What is it going to cost to liquidate it? and how many years to do so?


Can what you own be proxy for one of your desired funds? -- I assume not.


Best to work your plans first... ready? fire! aim.



best tools are a spreadsheet, the thing between your shoulders, and planning... that is working thru the options.


There may be tools out there.... but I'm more use to working these types with spreadsheets.

 

[kgtest]

25 stocks to watch. Seems like a lot of work. I own VUG, VOT, and VBK. I also own AAPL, MMM. And VHT. All of these have done fine.

Let the algo's pick the % and just rebalance my mix when one gets out of whack. 50% Large Caps for me (VUG). You know the companies:

Microsoft Corp
Apple Inc
Amazon.com Inc
Facebook Inc A
Alphabet Inc A
Alphabet Inc Class C
Visa Inc Class A
The Home Depot Inc
Mastercard Inc A
Comcast Corp Class A
Boeing Co
McDonald's Corp
Adobe Inc
Costco Wholesale Corp
Salesforce.com Inc
Netflix Inc
Thermo Fisher Scientific Inc
Accenture PLC Class A
Union Pacific Corp
PayPal Holdings Inc
NVIDIA Corp
Nike Inc B
Broadcom Inc
Texas Instruments Inc
Linde PLC (Formerly Praxair)

Sorry to make it longer...VHT, you know most of these mega corp's as well... I have a small position in these.

Johnson & Johnson
UnitedHealth Group Inc
Merck & Co Inc
Pfizer Inc
Abbott Laboratories
Medtronic PLC
Amgen Inc
Thermo Fisher Scientific Inc
AbbVie Inc
Eli Lilly and Co
Bristol-Myers Squibb Company
Danaher Corp
CVS Health Corp
Gilead Sciences Inc
Celgene Corp
Stryker Corp
Anthem Inc
Becton, Dickinson and Co
Cigna Corp
Intuitive Surgical Inc
Zoetis Inc Class A
Boston Scientific Corp
Biogen Inc
Allergan PLC
Vertex Pharmaceuticals Inc

 

[ERD50]

First I would have done my plan before ripping the accounts away . ....

What difference would that make? Unrealized capital gains are unrealized capital gains. The FA would not have any magic for this. OP has already had the options laid out. That's all there is. Why continue to pay the AUM while you try to plan for something that can't benefit from waiting?

-ERD50

 

[VanWinkle]

You will reap the benefits of lower costs. I would look for losers, balance out with cap gains and losses to start with. Then I would slowly unwind the taxable account each year taking into account how much I am willing to pay in Cap gain taxes. As you unwind, invest the money in your chosen Asset Allocation with the 3 fund or Lazy portfolio. You are on the right track, and you don;t have to rip the band-aid off in one attempt. Go slow and reduce taxes where possible.

 

[pb4uski]

If your income is in the 0% capital gains bracket, then it would be a no-brainer to fill up the 0% bracket with capital gains... and perhaps do that annually for a number of years until they are all converted to VTI.

Otherwise, suck it up buttercup and pay the 15%... either in one-fell swoop or a little bit each year over time.

Or just let them be... collect the dividends and let them grow to someday get a stepped up basis.

 

[bingybear]

What difference would that make? Unrealized capital gains are unrealized capital gains. The FA would not have any magic for this. OP has already had the options laid out. That's all there is. Why continue to pay the AUM while you try to plan for something that can't benefit from waiting?

-ERD50

technically you are right. It does not matter who is holding the appreciated stock if that is all they were doing.



If left with the FA, then he may make some good trades (or not).


The OP seems to know what his goal is (few index fund portfolio). This is likely good thing. I usually have a tentative plan before I would move significant assets. But like you said it doesn't matter who is holding the appreciated assets. Just my problem

 

[savory]

Thanks for the replies. My FA did not trade often so I have held some of these stocks for a while creating good gains. Selling them off 'slowly' is the concept I am following. I will say it is fortunate (but not for this situation) that I would not be able to take advantage of of the 0% capital gains tax benefit.

One reason for this change is I needed to sort my equity and bond holding in my accounts in order to limit my income gains in non-ira accounts. I was managing them poorly from a tax perspective and will have that sorted out before the end of next year. In an earlier post about this same effort, I discussed this.

In addition, while I am happy with my financial situation, I became more convinced that I could do this by myself and save the FA fees. These were significant and they could be directed to the capital gains tax. I was just hoping to find another approach.

Thanks

 

[audreyh1]

If you are trying to be tax efficient, then continuing to hold the individual stocks in non-Ira accounts may be your best option.

 

[DrRoy]

Just go with the VTI. You can sell the individual stocks over several years to spread out the taxes. I did a very similar thing when I got rid on an FI several years ago.

 

[The Cosmic Avenger]

Don't forget you can gift appreciated stock, especially a good idea if you already give a lot to charities each year. I started gifting stock to my donor-advised fund, then bought the same amount of stock with the money we had set aside to give to charity, in order to chip away at our capital gains tax liability.

 

[savory]

If you are trying to be tax efficient, then continuing to hold the individual stocks in non-Ira accounts may be your best option.

Just go with the VTI. You can sell the individual stocks over several years to spread out the taxes. I did a very similar thing when I got rid on an FI several years ago.


Don't forget you can gift appreciated stock, especially a good idea if you already give a lot to charities each year. I started gifting stock to my donor-advised fund, then bought the same amount of stock with the money we had set aside to give to charity, in order to chip away at our capital gains tax liability.

Thanks, all of these suggestions which is the general approach I am planning now. As for gifting, I am not there yet in terms of age. But, I am beginning to bake it into my plan.

 

[Montecfo]

If you are trying to be tax efficient, then continuing to hold the individual stocks in non-Ira accounts may be your best option.

Ditto. I think you can assess the gain positions that you view as having the worst prospects and manage those with liquidating loss positions to minimize taxes at the outset. But I would not incur heavy taxes from sale of high-quality gain positions just to redeploy into an index. I think you are likely to come out far worse if you do that.

 

[gcgang]

Analyze your holdings according to S&P Industry groups so you can understand where you're over/under weighted.

Before you sell highly appreciated securities, if you are even minimally charitable, research gift annuity options. Depending on your tax situation and state tax laws, you may be close to better off financially giving assets away and getting an immediate tax savings and future income, than selling, paying tax and reinvesting.

 

[OldShooter]

No recommendatiions; I haven't spent the time necessary, but a couple of observations:

1) Your individual stock holdings might, in aggregate, correlate quite well with an S&P 500 fund. I suggest that you test this idea in Portfolio Visualizer. If they do correlate you can consider managing them as if they were your own little S&P fund.

2) One danger I worry about here when the sharks start feeding on tax strategies is that the tax tail will begin to wag the investment dog. The only thing that matters is how much money is in your pocket at the end of the day. If that maximizing involves paying some taxes, you should not care.