Which would you sell?

[disneysteve]

We have two equity holdings that I'd like to reduce our exposure to. Last year I sold a chunk of one of them and I'm ready to sell more but can't decide which to sell. Both are held in taxable accounts so they generate taxable income and there are tax implications to selling them.

1. JNRFX - This is an actively managed US large cap mutual fund that we have owned since 1982. It has good performance numbers beating the S&P 500 for 1, 3, 5, and 10 years as well as since inception in 1983 (it was called something else before that when we first got into it). The big problem with this fund is that it kicks out a highly variable year-end distribution. It might be $3,000 one year and $23,000 the next year which messes with our taxes. I never know what our income will be. We have about $184,000 in this fund, about 4.3% of our portfolio.

2. CEG - This utility stock was spun off from Exelon a few years ago. I inherited the Exelon stock when my cousin died in May 2021. Ideally, I should have sold the shares right away and taken advantage of the stepped up cost basis but I didn't so here we are. Then CEG was issued and the price just took off, so in hindsight, I've made a lot more money by holding onto it. It was issued at $45 and is now around $300. Those shares are now worth about $320,000, and the price has come down a bit the past 6 months. It does pay a dividend so I get about $425/quarter from that.

My thinking had been to work our way out of JNRFX to reduce that year-end surprise. I sold about 17% of our shares in 2025. I'm thinking it still makes sense to do that again this year but I'm wondering if I should reduce our single stock exposure with the CEG which has grown to be 7-8% of our portfolio.

Before you ask, no, if I was investing today, I wouldn't buy either of these things. Since both are taxable holdings, selling either will generate taxable long term capital gains when sold. Last year I had to be mindful of our MAGI for ACA but now that the subsidy has been eliminated that's no longer a concern for 2026.

Should I sell the fund or the stock or a little of each? I'm not an active trader by nature or history so I'm not sure if there's a preferred choice here for some reason. Thanks for any thoughts.

 

[Kings over Queens]

Hard to say without knowing why you want to reduce exposure in each.

JNRFX is 4.3% and CEG at 8%, neither are significant in the grand scheme of things.

Without knowing much more, if it were me, I'd probably dump the CEG. I'm an index investor by nature and truth told not enamored with Utilities. So if its me, I dump most if not all of CEG and roll it into QQQ and one of the S&P index funds, with some held back for a party with hookers and blow.

Kidding about the last part.

 

[COcheesehead]

All else being equal. I would be more strategic and look at the lots for each and determine the best approach for reducing capital gains.
I also do not like managed equity funds in taxable accounts so there’s that.

 

[Al18]

CEG is a power company. Historical PE ratio of power companies is 10. It’s widely overpriced due to AI, and the current PE is 34. I expect the stock price to be about $100 when the bubble bursts.

JNRFX is an SP500 fund. Since 1999, history says the fund could price could drop 50%. JNRFX has a higher than normal expense ratio of 0.81%

I would sell a lot of CEG and a small amount of JNRFX.

 

[disneysteve]

Hard to say without knowing why you want to reduce exposure in each.

As I said, I want to reduce the JNRFX because of the unpredictable annual capital gains distribution we get hit with every December. I want to reduce the CEG because I don't like that a single stock is such a large percentage of our portfolio.

 

[disneysteve]

All else being equal. I would be more strategic and look at the lots for each and determine the best approach for reducing capital gains.
I also do not like managed equity funds in taxable accounts so there’s that.

I don't like managed funds in taxable either, but back when we were young and stupid and index funds weren't nearly as popular, that's what we went with.

The CEG is a single lot so it all has the same basis.
The JNRFX was purchased over many years with DCA but we've also sold shares a few times over the years and I'm just using average basis. I know picking individual lots could be better but considering the last time we purchased shares was many years ago, at this point they all have substantial gains.

 

[disneysteve]

CEG is a power company. Historical PE ratio of power companies is 10. It’s widely overpriced due to AI, and the current PE is 34. I expect the stock price to be about $100 when the bubble bursts.

That's an excellent point, and is probably related to why the share price has fallen quite a bit in the past 6 months as the AI bubble deflates. That might actually be the answer I'm looking for. I've enjoyed the run up from $45 launch to $300 current (which was as high as $412). Now is probably the time to get out.

 

[fognostic]

The S&P 500 is light on public utilities and really strong on tech. If you wanted to balance out an S&P like index fund with some public utilities, there is VPU to consider for more diversified exposure to the sector.

I would sell CEG regardless. If you are hesitant to sell it all at once, you could divide it up into pieces and commit to a periodic sell plan until it is gone or exchanged into VPU. But as AI18 has already noted, utilities as a group are a bit high on AI of late.

It has good performance numbers beating the S&P 500

As for JNRFX, it almost sounds like you found a rare actively managed fund that beats the index. Or did you? If you are comparing a large growth fund to the S&P 500, perhaps instead you should compare to a large growth index. Apples to Apples, looks to me like the managed fund isn't all it's cracked up to be after all. You'd do as well with a low cost large growth index fund if that makes it easier for you to sell it....

 

[GoBirds]

Outside the box

Look up and ask your money professionals if you can gift some of these shares to your daughter

 

[disneysteve]

Outside the box

Look up and ask your money professionals if you can gift some of these shares to your daughter

I hadn't considered that. I have looked into donating shares of CEG but I need to get them transferred into our brokerage account first which is a pain and requires a medallion signature.

 

[RetiredHappy]

I hadn't considered that. I have looked into donating shares of CEG but I need to get them transferred into our brokerage account first which is a pain and requires a medallion signature.

I have Fidelity and it does not require a Medalion signature when I transfer stocks to another Fidelity account which I am authorized on. In this case, I gift stocks to my son every year.

 

[pb4uski]

The tax uncertainty would bother me so I would sell down JNRFX.

You could also consider using protective puts to hedge CEG.

 

[disneysteve]

I have Fidelity and it does not require a Medalion signature when I transfer stocks to another Fidelity account which I am authorized on. In this case, I gift stocks to my son every year.

I need a medallion because the stock is titled differently than the account I'd be transferring it into.

 

[pb4uski]

I hadn't considered that. I have looked into donating shares of CEG but I need to get them transferred into our brokerage account first which is a pain and requires a medallion signature.

What is the CEG shares in now if they are not in a brokerage account? Who are they with?

 

[disneysteve]

The tax uncertainty would bother me so I would sell down JNRFX.

That's been my driving motivation.

I appreciate everyone weighing in. I guess there's not really one "right" answer here. Solid arguments can be made on both sides. Of course, it isn't a binary choice. I don't have to do one or the other. I think I may split it and sell some of each. That lessens the year-end tax issue from the fund and reduces the concentration we have in the single stock.

 

[disneysteve]

What is the CEG shares in now if they are not in a brokerage account? Who are they with?

I own the shares directly through the holding company, ShareownerOnline. I wanted to move them into our Vanguard account but that's what requires the medallion.

 

[Al18]

"Don't let perfect be the enemy of good"

 

[disneysteve]

"Don't let perfect be the enemy of good"

One of my favorite life quotes.

 

[pb4uski]

I own the shares directly through the holding company, ShareownerOnline. I wanted to move them into our Vanguard account but that's what requires the medallion.

Have you considered opening a brokerage account with Schwab or Fidelity? IME Vanguard is difficult to deal with. They are the only financial institution that I recall requiring a Medallion signature. It is their way of retaining accounts.

 

[disneysteve]

Have you considered opening a brokerage account with Schwab or Fidelity? IME Vanguard is difficult to deal with. They are the only financial institution that I recall requiring a Medallion signature. It is their way of retaining accounts.

We have a Schwab account. I’ll have to check with them. Most of our portfolio is with Vanguard and I like dealing with them far more than Schwab but I’d be okay with using Schwab for this if that’s easier. Thanks.