Is it Time to Let Go

[Musica40]

Hope the moderators allow this question. Here goes. Investment question. I am torn as I do not know the answer to my questions.
In 2022, I invested $51K into CVS stock based on a financial recommendation.
We own 488 shares that are worth $30,900. We have lost $20,510 in value.. My initial invetment was $51,410.
I can’t see CVS making a miraculous recover. Same thing applies for WBA.
We have 832 shares. Invested $30k. Only worth $8,731 today. Down $21,263. Purchased in 2022.
I feel that I have waited enough for them to recover. The only reason that I haven’t sold them is because I have lost over $41K since our initial investment.
So my questions are:
1. If I sell them at a loss, how does that affect me when I file taxes?
2. Is it time to sell these stocks or should I wait for them to maybe recover?
3. Will I receive any credit on my taxes due to the losses?
I am confused and disappointed. Thank you all in advance.

 

[erkevin]

For clarification: in a Roth, a Trad IRA, or a taxable brokerage?

 

[Kings over Queens]

erkevin asks an important question.

the tax ramifications are neutered if in a roth or trad ira, so the primary reason to sell and redeploy those assets is for reinvestment.

if in the taxable brokerage, you can sell stocks and capture losses to offset gains on other holdings. do you have other stocks you can sell at a profit?

I have no opinion on the two holdings you mentioned, but understand the pain when stocks tank. You are brave to come forward and ask for help.

either way, if you don't have any faith these will recover, my opinion is that you are better served selling them, cutting your losses, and reinvesting to make back some of what you've lost.

 

[GrayHare]

If you have no capital gains in the same tax year as a loss of that magnitude, your tax deduction for the loss is capped at $3000, but any excess loss beyond $3000 carries forward to future years when it can offset cap gains in those tax years.

 

[Texas Proud]

From what I have seen on TV the last few months both are not doing well and their possibility recovery is dim...

I would get rid of them no matter what kind of account they are in...

My question would be why are you buying individual stocks? Do you have others that spread the risk that have gains?

Another question that I wonder is who recommended them to you? No mention of that in your post..

 

[DJRR]

Are those the only 2 individual stocks you own or just the 2 losers? If they are the only 2 then admit you are a poor stock investor, sell, invest proceeds in your portfolio, and never invest in an individual stock again (been there, done that). If in an after tax account you can write off the loss against your taxable capital gains and $3k per year of your income. The IRS will share your loss at your marginal tax rate.

If you play lots of stocks and lost on two that's life. Sell and move on to better prospects. The retail pharmacy industry is not somewhere I would want to invest my money.

 

[Musica40]

For clarification: in a Roth, a Trad IRA, or a taxable brokerage?

Rollover taxable IRA.

 

[GrayHare]

The loss has no direct tax consequences in an IRA.

 

[Al18]

There are no tax losses or gains in any type of IRA account. So no changes to your taxes no matter what you do.

You should not take any more financial advice from this stock expert.

A rollover traditional IRA is not a good location to buy and sell individual stocks. It has poor tax treatment, as mentioned above. If you have not spent lots of time researching individual stocks, consider buying index mutual funds or ETF in your rollover traditional IRA.

The loss has already occurred on these two stocks. If it was me, I would sell a big % of these stocks and hold onto the rest. Check on their performance in 6 months and reevaluate.

FYI WBA is up 15% in the past month and CVS is up 10% in the past month.

 

[target2019]

OP,
I see a similar problem with kid's SIMPLE IRA. In 2023, a close adviser recommended CVS. It was $6,828, and is now down about 30%. For comparison, I recommended VTI, $12,239.30 invested at the same time as CVS, and VTI is showing about 25% gain.

So, her predicament is like yours, with no recovery of tax loss possible.

I am being very careful how I proceed with advice. On one hand, I believe that total stock market (VTI) will outperform CVS. However, CVS may split up the company, and perhaps the major part of it will recover, and perform much better. I cannot say I've looked into that much.

The way I am leaning now is to recommend to her (and the close adviser) that she abandon half of the CVS shares and use the proceeds for VTI or something complementary.

I don't know what your goals are for this Rollover IRA, OP, but I think some thought should go into that. I also think you need to cash out on at least half of those shares, but I don't know where you'd go from there, as I don't know your plan.

 

[Musica40]

For clarification: in a Roth, a Trad IRA, or a taxable brokerage?

Traditional IRA.

 

[EastWest Gal]

Are those the only 2 individual stocks you own or just the 2 losers? If they are the only 2 then admit you are a poor stock investor, sell, invest proceeds in your portfolio, and never invest in an individual stock again (been there, done that). If in an after tax account you can write off the loss against your taxable capital gains and $3k per year of your income. The IRS will share your loss at your marginal tax rate.

If you play lots of stocks and lost on two that's life. Sell and move on to better prospects. The retail pharmacy industry is not somewhere I would want to invest my money.

Agree with this answer. I only have one individual stock which is a small amount leftover from my inheritance. Otherwise it's all index funds. Diversification is key.

 

[RetiredHappy]

Since it is in Traditional IRA, you cannot claim losses on your IRS return.

Looking at your prior post, it looks like you own a bunch of individual stocks. Since they are in IRA, I would suggest that you sell them and buy a broad ETF. Stock picking doesn't work for non-insiders.

Should I Sell?

We are ready to sell and move pass Tesla. Sell and use the loss for TLH against other gains. You can always get back into the stock beyond the wash sale period,, if you think it may do better over the next 10+ years.

www.early-retirement.org

 

[Texas Proud]

Do not fall into the 'sell half and see what happens' trap... if the stock is good enough to hang onto half it is good enough to hang onto all of it...

If it is a loser, it will lose... so sell it all or keep it all... according to what you think will happen going forward..

The other trap out there is to double down... You buy a stock... it drops big time... you think you made a good decision so you try and justify it buy buying more 'cheaper'... now, this CAN work at times... but there probably is a reason it dropped big time...

 

[DrRoy]

Guidance that I have heard of before is: if you had the value in cash, would you invest in this? If not, then sell and invest in something better.

 

[Lsbcal]

What you need to consider carefully is where the money will go when you sell. This involves your overall financial picture is not mentioned here. Do not base your decision on spilled milk.

For many of us having a well thought out AA and putting the equity in some well thought out index funds to spread the risk is a good way to go.

 

[OldShooter]

Do not fall into the 'sell half and see what happens' trap... if the stock is good enough to hang onto half it is good enough to hang onto all of it. If it is a loser, it will lose... so sell it all or keep it all... according to what you think will happen going forward.

Guidance that I have heard of before is: if you had the value in cash, would you invest in this? If not, then sell and invest in something better.

Good advice here. The way I have heard it said is that a decision to hold a stock on a particular day is exactly the same as a decision to buy it that day.

The behavioral economists have studied the way we look at money. We value avoidance of losses far more than we value opportunities to gain.

This is why we say things like "I'll sell it when it goes back up to where I bought it." The idea here is that until a sale we can pretend we haven't lost anything, which we of course have. The stock doesn't know or care what we paid for it. That is sunk cost. All that matters is today; Is the stock something we want to invest in today? (Sunk cost - Wikipedia)

 

[Koolau]

Guidance that I have heard of before is: if you had the value in cash, would you invest in this? If not, then sell and invest in something better.

This has been my strategy for a long time. In the past, I've sold in a panic or hung on too long.