I have much of my savings for my kids’ education invested in stocks (yeah - I know!) Looking ahead to next year’s tuition I know I am going to need to sell enough stock to raise approximately $10k. But I’m not going to need the cash until next February. The money is held in stock of less than 10 major companies. I can style the sales so as to even out capital gains and losses for tax purposes.
The market is up right now, so I guess the safest thing would be to sell now to avoid the risk of the stocks tanking between now and Feb. I would hate to wait until Jan-Feb, and realize that the stock I could have sold for $10k now is worth only $8k or so. Seems as tho the market is well ready for a correction after its recent run-up. OTOH, it sure seems to be trending upward, and if hanging on aother month or 2 will recoup some more of my last year’s losses, well - that would be nice.
My understanding is that many of the market’s biggest losses have historically occurred in October. However, some stats I’ve seen have shown Sept as historically the worst month, with returns generally improving from Nov thru Jan. Yes, past performance is no guarantee . . . I guess I ought to also examine the specific historical trends for the specific stock I am cosidering selling.
But I wondered if any of you had general opinions on how you would handle this situation? Yes, I know this is - in part - a crap shoot. I am such a lousy and amateurish investor, tho, that I would appreciate anyting you might be able to offer.
But you could play it conservative and sell half now, and half in a couple of months. Yeah, there’s more figuring involved when it comes time to do your capital gains etc., but it’s sort of like the opposite of making periodic purchases - some months you do better and some you do worse but it smoothes out the profits / losses somewhat.
My wife does our taxes, so I’ll ask her opinion. But it should be only another couple of entries on the one form. Or another form next year if I wait until Jan. Not the kind ofthing to really complicate our return.
If it was me, I’d wait. But that’s just because I think things are trending upward. I’d also check to see if any tax code changes are upcoming for 2010 that might affect the amount of capital gains tax I’d have to pay if I sold in 2010 vice 2009.
My advice woudl be to read the book “How to make money in stocks” by William O’Neill. There are a couple specific chapters dedicated to selling stocks, and when this should be done.
In my non-professional opinion, I would not be in stocks much right now unless I was following them VERY closely, since right now the market is very unpredicatble. Definitely consider taking some gains now and some later to hedge your risk a bit, and, very importantly, don’t let tax implications complicate your decision to sell. If you see the indicators that it’s time to sell, trying to hold on even for an extra week can be disastrous. In that case you save paying a few percent in tax, but suffer a 25% or greater loss…
Good luck! I disagree that short-term money should always be held in lower risk investments, though that is the CW. If you read up, do your homework, and watch the market, you will know when to move in and out of stocks. You will lose on some of them, but you’ll also make some nice gains that should more than even it out.
The economy as a whole is starting to gear up for the Christmas season shopping which is often used to make up for losses through the previous three quarters and has a ripple effect everywhere. I’m thinking this season will (to put it in economic terms) suck balls. Recession (I’d be willing to call it Depression but that’s another thread), Double digit unemployment and people are going to go spend $500 on frivolities?
So my completely wild assed opinion is that we’re not going to see the DOW reach 11,000 before February and I’d take a better than even money bet on it going back to 9,000.
Yeah - but this requires more attention than my historical buy and hold (and ignore) approach.
Bottomline, a little over a year ago I added up my nut and figured I had my kids’ education covered. 3 kids in college, I KNEW I had promised them $X towards their education that would be due over the next 4 years. If I had cashed it out and stuck it in my mattress, I’d still have it covered.
Fast forward a month or two and - to put it mildly - I no longer had it covered. Since then we have adjusted our budget and saving, and the market has made considerable gains, such that we are looking much more comfortable WRT the kids’ education.
Suffice it to say that the mindset I had when I styled this portion of my investments in this manner is not what I currently think. Not since I bought my last house did I need this much cash at this precise of a time.
Generally speaking, the market drops in the fall, stays low for the winter, and recovers in the Spring. Most market crashes happen in September and October. I make it a habit to move some money from stocks into bonds right around mid-September (then rebalance again after the New Year) - and have more reasons to be happy I do that than reasons to regret lost gains.
And again, I will reiterate, funds that you need to access in the short term should never be in securities. The question you are asking has no answer. You are asking for a prediction that nobody can make. If I were able to make such predictions, I wouldn’t be bandying it about with you on a message board, I would sipping a Pina Colada on my own private Island and counting my yachts.
You have promised your kids this money, and after dipping below that amount during the recent downturn, you still want to risk it? :dubious: Why don’t you just go to Vegas and put it all on red? It would be equally as responsible an act.
For more info, I would reccomend “A Random Walk Down Wall Street” by Burton Malkiel.
Furthermore, you are asking about the general direction of the market when your investments are in “less than ten” major companies. To begin with, this does not meet my test of being diversified. You should never have more than five percent of your portfolio in any single security. To expect “less than ten” companies to mirror the general direction of the market, in itself something nobody can predict, introduces another layer of variability. Your portfolio could do better, worse, or the same as the market in general, or even go down while the general market goes up. Without knowing the specific issues involved, and how they are allocated, we are stabbing in the dark here. Even knowing those details, any prediction offered would be pure hubris.
My sincere advice is to thank your lucky stars the market has rebounded to a point where you can meet your goals, and get out now. It is true that you might make a little extra coin, but it is just as likely that you will be explaining to the kids how you gambled with their college money and lost.
Ok, how about this: You bet your bippy the market is going up! In fact, it is going to have such a meteoric rise that you will be able to fund all your kids education on the profit and have enough left over to buy each one a luxury automobile to head off to school in, and keep the principal for yourself!
Or: Sell now! The market is about to crash, big time, and you will be left selling apples in the street!
My point is, anyone who comes in here and posts an opinion is making speculation about the future, and one speculation is as good as another, i.e., worthless.
And to anyone who comes in here with such a post, let me ask you in advance, can you please send us photos of your island paradise, your butler, yacht and private Swedish masseuse as proof of your prognosticating abilities. Especially the masseuse. Because if you can predict what the market will do over the next few months, someting Warren Buffet would never claim to be able to do, you must be the richest person on the Dope, if not the planet, and a secret trillionaire.
I have given you the ONLY advice that can be conscientiously given to a person in your position. Any other counsel is simply smoke up your ass.
I am sure other posters will come in here to agree with this.
In fact, if we get a bunch of posters who think the market is sure to go up, that is exactly the time you should be looking for the bubble to pop. As Buffett once said: “Be fearful in times of greed, and greedy in times of fear.”
And I find it interesting that although there are prohibitions on this board against giving legal or medical advice, financial advice seems to be A-Ok. :dubious: What’s up with that?
I’m on Stan’s side here. The question you’re asking has no answer, because answering requires both (a) predicting the future and (b), knowing what your portfolio and tax situation actually is. Yeah, the advice he gave isn’t a specific answer to your question, but the fact that you even asked the question implies that you ought to take it.
The quarter on my desk suggests that you should sell now in 2 out of 3 flips.
Stan, are you a credentialled financial advisor? Got a series 7 license? Anything? If not, maybe just dial it down a tiny bit? William O’Neill seems to be doing pretty well following his own advice, and plenty so-called experts were advisng to “average down” during the downturn in the economy, thus watching a good chunk of thier portfolio disappear, rather than move to cash and wait for the market to come back.
If you’ve selected your companies carefully, ten strong stocks in different industry groups can certainly be considered diversified. Trying to manage a portfolio of, at minimum, 20 stocks as you suggest can be a lot of fun for someone with tons of free time, and downright impossible for someone without it.
Beyond that, your advice is invalid simply because it assumes that he has ALL of his assets in 10 companies. He could very well have a 401(k) with assets allocated differently, and a savings account, and a money market account, all of which are considered diversification.
While I don’t encourage the type of investing (buy and ignore) that Dinsdale has done, your advice can be equally risky if you force yourself to diversify into stocks and industries you don’t understand.
Well I’ve had a series 7 (lapsed because I got out of that aspect of the business), and have worked front and middle office in asset management, hedge funds, and investment banks for nearly 2 decades.
I’ve met and worked with at least a dozen professional portfolio and money managers across an array of product types who could not figure this out. These are people who spend 50-60 hours/week doing their homework and watching the market.
The ones who have done the best long term do not try to time the market. They do not sit there and say to themselves maybe I can get another week or month of gains. They establish targets up front, hit those targets (hopefully), and get out. Market timing is like betting Odd or Even on a roulette wheel.
Wel, I think the queston I ask surely DOES have any number of answers, seeing as how I was asking for people’s opinions.
In my OP I thought I pretty clearly admitted that I had screwed the pooch in this particular aspect of my investments/net worth - undoubtedly have in other areas as well. I’m taking steps to correct and avoid repetition of this particular situation.
Having said that, I didn’t think I needed to explain that I was not presenting the entirety of my financial situation in order to decide what to do in this limited area. Have no fear (not that you should care), but the overall state of the Dinsdale “estate” is pretty damned comfortable and secure.
Heck, now that I know to just liquidate everything and put it on red, I feel even more comfortable. I had foolishly been leaning towards black, myself!
Dude - how many responses to yourself in a row was that. Someone wrapped just a tad tightly?
Because if you can predict what the market will do over the next few months, someting Warren Buffet would never claim to be able to do, you must be the richest person on the Dope, if not the planet, and a secret trillionaire.
