Hormones out of control

[harley]

Like Unclemick, I have an account that I use for speculation, completely separate from my "real" investments. I've been gambling with individual stocks in it since the early 90s, starting with a $5K stake. I've had my ups and downs, my multi-baggers and my bankruptcies. Overall, I've been tremendously successful, mostly through a single investment. And therein lies my dilemma.

While my gambling account is still an acceptable percentage of my net worth, the dollar amount has gone over $100K. I've been thinking that maybe I should liquidate it down to a less high-roller amount, and move the rest into my "real" portfolio, split amongst my normal AA. Or I could sell a bunch of the stocks and diversify in the hormone account, hoping to hit another jackpot. Or, I could just leave well enough alone, and hope I don't ride the big winner back down (been there, done that).

I have been gifting ~$5K worth of stock to DD for the past few years. She's been in the 10% bracket, so she's been able to sell it with no cap gains, then use it to fund her Roth. I'll probably keep doing that, even though she's moved into the 15% bracket and they'll probably do away with the no cap gains thing soon anyway. I personally have been in the 10-15% bracket the past few years, but I've been using my bracket space for Roth conversions. So selling would result in a tax hit, and I'd have to skip the next few conversions. But I'd be selling with the cap gains at 15%, which may not last long.

So, what would y'all do?

 

[REWahoo]

"A bird in the hand..."

 

[Moemg]

Whenever I hit at a casino I take a small amount to still play with and pocket the rest . So I would pocket $90,000( put it in my regular portfolio ) and keep $ 10,000 in the play with it account .

 

[GregLee]

I'd take the money and run, except for 5k, which you could use to begin another experiment in speculation, for your amusement.

 

[brewer12345]

That depends. investing in individual securities isn't necessarily gambling, IMO. Is this account reasonably diversified and in high quality issues? Then its an investment portfolio. If it is 90% in one flaky small cap, then it is speculation. Sounds like you are somewhere in between? Care to kiss and tell what it is?

If one issue accounts for a lot of this account, I would be inclined to take profits on it, personally.

 

[rescueme]

Whenever I hit at a casino I take a small amount to still play with and pocket the rest .

I do the same (and the same action with my/DW's investments)...

 

[harley]

That depends. investing in individual securities isn't necessarily gambling, IMO. Is this account reasonably diversified and in high quality issues? Then its an investment portfolio. If it is 90% in one flaky small cap, then it is speculation. Sounds like you are somewhere in between? Care to kiss and tell what it is?

If one issue accounts for a lot of this account, I would be inclined to take profits on it, personally.

Nope, this is truly an undiversified speculation account. 12 stocks, 10 tech, 1 AAPL accounting for ~75% of the value. I bought in at just under $10 (split adjusted) in 1997, sold 2/3 of it at $175 in 2007, couldn't figure out what else to buy with the money so I bought back in at around $100 in 2008. I have two issues. One, the tax dog is wagging the investing tail. Second, I truly can't think of another company I'd rather own with the money, and if I sell and buy a bunch of Enrons (again) I'll feel like an idiot.

I guess I could buckle down and turn the money into an "account reasonably diversified and in high quality issues". But that would be boring, and w*rk besides. And I might find out I'm not really that smart. As I said, this is a hormone account. I'm hoping to get more opinions in the poll. If there turns out to be a clear winner I'll probably go with the suggestion. If not I'll probably keep dithering.

Seriously, my biggest problem with doing the cashing in thing is the loss of Roth conversion space in my tax bracket. I don't know how long I'll be able to stay in the lower brackets. Interest rates will rise, and eventually my funds will start spinning off cap gains again. It's sort of between risking higher cap gains on the stock later (not to mention loss of value if something happens to AAPL), or higher taxes in 15 years due to RMDs if I don't maximize my ability to convert now. If only there was some certainty in our tax system I'd be able to plan. Frustrating.

 

[brewer12345]

Personally, I would take some money off the table with AAPL simply because it is too big a portfioon of the account. If you cannot find places to put the money, bank it or add it to your main portfolio. Or go have fun with it.

 

[travelover]

I'd take the money and run, except for 5k, which you could use to begin another experiment in speculation, for your amusement.

+1

 

[Nords]

Overall, I've been tremendously successful, mostly through a single investment. And therein lies my dilemma.
So, what would y'all do?

That seems about right. Spinning a bunch of plates until one of them pays off far beyond expectations.

You need to figure what the heck it is you want to do:
- Harvest all but $5K as "profits", and return to the challenge of turning a little money into bigger money?
- Declare victory at a 20x return and retire at the top of your game?
- Donate the max deductible to your charitable gift fund each year for the next few years, and start a new project in philanthropy?
- Learn to appreciate the nail-biting difference between committing $5K among a few stocks versus committing $100K among a few stocks?
- Decide that success is boring, and proceed to the next level with shorts and options?

If you continue on your present course you are almost certain to determine the difference between "lucky" and "brilliant investor". For most of us, it's not the latter.

 

[Bestwifeever]

I would take it all to the casino

You'd be selling high to move the majority to your boring traditional AA, so that would be a smart move imho.

 

[kumquat]

Cash out 50% and let PMS (or the male equivalent) go for it. You won't suffer a loss.

 

[clifp]

You maybe selling your investment skills short. Ignoring your AAPL. It looks like you turned 5K into 25K over the course of 20 years or CAGG of 8.7%. This is virtually identical performance to the Vanguard 500 fund over the same period of time, although a comparison to the NASDAQ maybe more appropriate.

Perhaps you've just been lucky three times with one of the countries greatest success stories. I've commented before about one of my best trade in the period writing long term Apple puts at 65. But in pales comparison to holding on to Apple for ten years (it was considered over priced then), selling Apple at 175 in 2007 (within 10% of the high) and buying back at 100 in 2008 when nobody was buying Apple (within 15% of the low) and holding on to after it reaches 340.

I'm with Brewer I'd lighting up on Apple, but only if it is either more than 4-5% of your net worth OR you think it overvalued. I personally have no clue on Apples value at this level. Gifting AAPL has lots of tax benefits.

The problem with index funds is you are guaranteed to buy both the Enron, AIG, and GMs of the world, along with the Apples.

 

[harley]

I guess I shouldn't be too surprised at the number of cash out recommendations. We do tend to be a conservative group here.

I think I might take y'alls advice, and cash out at least 50% of the AAPL. That would give me plenty of cash to play with for future specualtion, while leaving some riding on the big winner.

You maybe selling your investment skills short. Ignoring your AAPL. It looks like you turned 5K into 25K over the course of 20 years or CAGG of 8.7%. This is virtually identical performance to the Vanguard 500 fund over the same period of time, although a comparison to the NASDAQ maybe more appropriate.

Perhaps you've just been lucky three times with one of the countries greatest success stories. I've commented before about one of my best trade in the period writing long term Apple puts at 65. But in pales comparison to holding on to Apple for ten years (it was considered over priced then), selling Apple at 175 in 2007 (within 10% of the high) and buying back at 100 in 2008 when nobody was buying Apple (within 15% of the low) and holding on to after it reaches 340.

I appreciate your comments. Almost all of my other (successful) investments were in IT, especially in the security field (Checkpoint, Cisco, etc). The old saw about buy what you know. The funny thing about Apple is I originally bought it back in 97 because I was royally pissed at Microsoft, and was thinking wouldn't it be funny if Apple ends up kicking MS's @ss. The other brilliant AAPL move really was just lucky timing. If I'd known about the big drop coming I'd have sold a lot more than Apple.

I don't seem to have the same drive to speculate/gamble on stocks anymore. I don't know if it's because I have seen that I've been lucky and unlucky, but not particularly skillful, or if it's because since I FIRE'd I don't realy have a specialty that I "know" anymore. And I'm not following news and current events closely anmore either. I probably should have bought Krispy Kreme a few years ago, when the country was hiring all the new policemen. Hindsight.

Hmmm.. maybe I'll get DD to help pick some stocks with the money. She's up on what's hot and current. This might be a good way to get her interested in investing, and having a couple stocks go to zero might be a cheap way for her to see the value of indexing.

 

[braumeister]

You'll make the best decision for yourself, but if I were you, I'd liquidate half the account and just treat myself to a great vacation with it.
The other half, I would leave where it is and designate half of the gains it makes as DD's money once she starts actively helping direct the account.

 

[haha]

I just wish my hormones could still get out of control. Any suggestions?

Ha

 

[youbet]

The fact that this money is in a separate account is moot. The $100k is part of your overall AA. Hold or trim the AAPL based on your opinion of where the stock is going to go and how holding or selling impacts your overall (not just the hormone account) AA.

 

[Purron]

I'm not a gambler by nature but have been to Vegas and Atlantic City a number of times on business trips. Always limited myself to $200. Usually lost it all but did come home with about $1,000 once! Even when I lost my $200, it was fun and exciting and worth the loss for the free drinks, fun and entertainment value!

The thing I'm suggesting is to limit your exposure. Harvest some gains and keep enough in the game to keep it interesting but not hurt too much if it tanks. And have some fun and enjoy the ride along the way. It's pretty stimulating to roll the dice and see if you're a winner. Sounds like you're pretty good at it too

But in the end, you "Gotta know when to hold 'em, know when to fold 'em...."

 

[harley]

I just wish my hormones could still get out of control. Any suggestions?

Ha

Damiana - Mexican drink specialties - Cabo San Lucas Mexico

Damiana - Love potion of the Aztecs. One shot and this 'Old Gringo' was in trouble...

 

[Patrick]

I just wish my hormones could still get out of control. Any suggestions?

Ha

Tribulus terrestris.

 

[kcowan]

I have played the same game. I invested in AAPL at a split adjusted $8 and then sold it all at $75. Then bought back in at $51 with half and still hold the whole damn thing. It currently occupies $100k of our portfolio. I cannot bring myself to sell it.

Had another winner that we got for $0.88 and sold for $9.50 and put all the proceeds into our main portfolio (Jones Soda). Never looked back.

There have been others, many losers that reduce taxes owing. But generally the wild-assed bets have paid off because we are not afraid to bail out of losers and hang onto winners.

But the real question you are asking is: What is your risk tolerance? And only you can answer that one!

For us, it is higher than the average on this board. We are currently holding Lululemon for example, when all of our friends took profits $50 ago. If it drops 20%, well it was never real money then was it?

 

[packrat44]

If your speculation account is less than 10% of your total liquid investment account, I would continue as you are presently doing. If the speculation account is greater than 10%, I would reallocate the excess to your "real" account.

 

[mountaintosea]

Question is what happens to AAPL if Steve Jobs is not able to return? I owned the stock before he returned. Sold at a profit unfortunately. He returned and the rest is history. Now he is gone again, many speculate the stock will be trashed again if his health problem gets the better of him?

 

[kcowan]

Have you looked at AAPL since Jan 1? I think it is already getting hammered by uncertainty about Jobs future!

 

[BradMM]

i just wish my hormones could still get out of control.

ditto!