With the stock market hitting all-time highs on a what seems like a daily basis, now is the time to review heavily appreciated and concentrated stock holdings.
What is intent of the investment that you are holding? Is there a particular goal in mind? No one knows what the value of the investment will be when you want to achieve your goal.
I had a client recently contact me and we decided it was prudent to sell off some of his company stock that is at a 15yr high to pay off his house. One of his goals was to have his house paid off before he retires to reduce his overhead. The piece of mind of knowing that he is one step closer to retirement was worth the potential increase or decrease in the stock’s value.
Do you have 1 stock that is more than 25% of your total portfolio? If so, you may now be overly concentrated. With the year-end fast approaching, sales can be made in both this year, add next year to minimize taxes.
What if you don’t want to recognize a tax gain, but want to diversify your individual stock into a portfolio of stocks?
If you have over $500k in one stock, then there is potentially good news, through the use of an exchange-traded fund. With an exchange-traded fund, you contribute your stock and end up with a portfolio of stocks that other people have also contributed, without recognizing any taxable gain. There are restrictions on withdrawing funds and minimum net worth qualifications but can make sense for certain situations.
What is your situation? Now is the time to look at everything when prices and values are high. Nobody wants to play the what if game. You know the game that everyone played in 2000 and then again in 2008. Is the opportunity cost of achieving your goals worth repositioning your portfolio?
Michael McGinley, CFP ®
Comprehensive Wealth Manager | Tax Advisor
Chandler, AZ 85226
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Clients should consult with their personal tax advisors regarding the tax consequences of investing.
An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks such as not diversified, price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and index tracking errors.
Investors should consider the investment objectives, risks, charges and expenses of the Exchange Traded Fund carefully before investing. The prospectus and, if available, the summary prospectus contain this and other important information about the Exchange Traded Fund. You can obtain a prospectus and summary prospectus from your financial representative. Read carefully before investing.