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I’m not cut out for individual share ownership. Through pure happenstance I’ve ended up holding shares in two separate companies, and the problem is I now feel obliged to make judgement calls. Should I keep them, sell them, how are they faring against their competitors? It’s all a bit of a hassle.
Compare that to my retirement portfolio, stuffed full of index funds representing thousands of individual businesses. I never give those a second thought. So why can’t I extend the same indifference to two measly company shares?
The sensible move is obvious: sell up and reinvest the proceeds into an index fund. But that’s where FOMO is gumming up the works. A quick look at Google Finance tells me both are doing rather well — one has returned 55% over the trailing twelve months, the other 35%. And that little voice in the back of my mind keeps whispering: “what if they do it again?”
I’d never think like that about my index funds. With those, I just accept whatever the market delivers, good or bad, and get on with my day.
I can’t imagine the stress of actively managing a basket of 30 or 40 individual holdings. I’d spend a quarter of my day staring at a screen. Individual share ownership is clearly not my hobby.
And yet, thanks to that stubborn irrational streak, I’m not doing the sensible thing. I’m holding on, letting two positions consume 95% of my investment headspace, despite comprising less than 0.1% of my total wealth. Whatever they do will have absolutely zero effect on my net worth.
What’s really amusing, if I’m being honest with myself, is that my excuses have a remarkable ability to shapeshift with the seasons. Two years ago, when both shares were underperforming, I held on because it felt wrong to sell at a loss, I’d wait for a recovery. Now they’ve recovered rather nicely, I’m holding on because it feels wrong to sell winners. I’d hate to miss what comes next. I have a creeping suspicion that next year, whatever happens, I’ll have an equally airtight excuse at the ready. If nothing else, I’m consistent in my inconsistency.
I consider myself a rational investor and a reasonably sensible person. I’ve written all of this out, diagnosed my own irrationality in some detail, and arrived at the perfectly logical conclusion that I should sell. I won’t, of course. I’m a little bit weird that way. But it has to be said: it was a very sensible conclusion to reach.
I’d consider selling half of them, or a fourth, or some other fraction. That way, you can lock in any gains you’ve attained while still leaving yourself open for additional gains in the future. It’s a lite version of rebalancing your portfolio.
I’d consider selling half of them, or a fourth, or some other fraction. That way, you can lock in any gains you’ve attained while still leaving yourself open for additional gains in the future. It’s a lite version of rebalancing your portfolio.
As you said, you are being irrational. These 2 stocks are so insignificant to your portfolio, why waste a minute of time thinking about them? I own ETFs, but have a handful of stocks that I’ve owned for a long time, Google, Amazon, Netflix, Visa, Berkshire and some others. The gains are so great that selling them would generate a big tax problem. My kids will inherit them and get the step up in basis.
I had a few shares of company stock (RSUs) that vested last week. I sold them immediately and moved the cash to my Roth IRA.
The stock had tripled in value since it was awarded, but it’s all a shell game.
The company looks good on the street because they’re outsourcing to India and laying off thousands of expensive US employees. The quality of the service provided is declining rapidly. I’m curious to see how much the C-Suite crew can pump up the stock before they cash out and jump to their next company.
Of course, now that I just got rid of it, they decided to divert 5% of last year’s bonus to stock, so I’ll have to look at it again for another three years. At least I’ll be retired by the time it vests.
I also have 9 shares of Lucid and 9 shares of Rivian, just because I like their vehicles and spent $100 on each company within my Roth IRA a while back.
I guess it could be worse. A guy I know works for HSBC. 40% of his yearly bonus is composed of deferred stock over a three year vesting period.
My wife is too nervous about owning individual stocks. So, I supply her with information and allow her to pick ETFs and index funds for 50% of our portfolio. I choose individual stocks or segment ETFs with the other 50%. I tend to go 20% large cap, 20% International, and 10% Flavor of the Month (Tech for the last 2 years, now moving into gold/silver and rare-earth elements). And yes, we do compete for the best annual return.
So you’re buy gold at a peak price? Why?
That totally goes against the philosophy of buy low sell high 🤔
My wife isn’t keen on individual shares, but she does hold a fairly substantial position in a UK-based international bank — the one she worked at for 20 years. It built up gradually through a combination of share options, an employee sharesave scheme, and reinvesting dividends back into the stock through a DRIP (Dividend Reinvestment Plan). If I’m being honest, we tend to overlook both her holding and my own two share positions when we think about our overall financial picture.
One tactic I have read that makes sense in situations like this is to make a 50% move.
That way if things go bad, you can call yourself a genius for not holding it all.
And if things go well, you can call yourself a genius for not selling it all.
Either way, you are getting yourself slowly out of the position that is causing unnecessary worry.
Yes!
Adam Grossman’s philosophy. See his article.
Mark, First of all thanks for your regular postings. You have become one of the authors I choose to click on with regularity.This is a nice, lighthearted approach to what can be a difficult topic.
I suppose I am a a Bogle disciple/Indexer at heart but have only been able to slowly unwind my individual equity holdings over the years. I am down to 12 now after accomplishing my goal of selling at least 2-3 equity holdings in entirely in the last few years and reinvesting the proceeds in Index Funds. I also have been “taking the cream off the top” of some of the individual equities that have done very well in this market to avoid them from becoming outsized holdings. I have the 2-3 individual equities picked out for this year’s liquidation but have not acted quite yet. I have been tempted at times to purchase new equity ticker symbols but keeping my eye on the annual goal to incrementally reduce the number of individual equities held has served me well.
Once I realized that my only goal was to keep pace with inflation in my “drawdown” years, it made the decision to dial out most of my individual equities easier. I suspect I’ll land on keeping maybe 3 long term,1 being in taxable account where I’ll let my heirs benefit from the step up basis after I am gone.
Dunn,
I am doing the same with both mutual fund companies and the number of my index funds. Prior to my parents deaths in 2018 all my investments were with Vanguard. My inheritance was spread between the other three other major mutual funds. We have been using the inheritance to delay Social Security until 70 and have been closing out the accounts as they are emptied. Now down to just Vanguard and Fidelity which holds my HSA account. I chose Fidelity for the HSA as they do not charge any fees for these accounts.
With our Vanguard accounts I am slowly consolidating the total number of index funds down to six.
In our Roths: Total World for which hopefully will never be touched.
In my traditional IRA: Total Stock (domestic), Total International, Total Bond (intermediate term), Short Term Bond, and Short Term Tips. I have this many funds so that when I have to tap these funds I can be strategic in where I trim the funds that have performed best. Eventually I can see the bond funds being trimmed to just short term TIPS for further simplicity.
Dunn, much appreciated. And we’re very much aligned — matching inflation during drawdown is the goal, and I’ve shaped my portfolio risk profile to do exactly that. I could reach for greater yield, of course. But voluntarily riding the volatility rollercoaster when you don’t have to seems like a peculiar hobby. I’m happy to leave that particular thrill to those who enjoy it.
“A quick look at Google Finance tells me both are doing rather well — one has returned 55% over the trailing twelve months, the other 35%. And that little voice in the back of my mind keeps whispering: ‘“what if they do it again?’”
Greed may solve your dilemma for you.
Greed? I guess if that’s how it sounds to you, it’s a valid observation from your perspective. In my reality, I tend to think of it as a bit more nuanced than that… but hey, I’m probably just lobbying on behalf of my ego.
MARK! I am exactly the same. I have 5 instead of 2 but… WHAT WAS I THINKING?! I just work around them and try not to make eye contact.
I think treating my individual shares like slightly angry dogs with a toothache and absolutely never making eye contact! is the best advice I’m going to get this week, possibly this year. I’m going to feel good about that rather than examine it to closely 😉
I view index funds as ballast. They’ll keep the “ship” upright and help to weather market storms with little involvement by the skipper. However, while they serve a purpose, they won’t overperform except in periods in which a few companies dominate the index, as has been the recent case with tech stocks in the S&P 500.
The minimum we want to achieve is to beat inflation. Over longer periods of time, say 15 years or longer, it has been shown that indexes and a diversified portfolio can do that. Our 10-year annual returns have been in the double digits.
But we’re all different and my spouse and I are no exception. It is possible to compare my spouse’s portfolio to mine. Her portfolio is about 30% Vanguard Target Date Funds, which are an amalgam of five indexes. I don’t own indexes, although I do own low cast ETFs and mutual funds. Since 2018 I’ve taken RMDs and held more “cash”. So direct performance comparisons are difficult. One thing that can be gleaned is the value of diversification which is present in both of our portfolios.
One difference is overall total returns. For the last 10 years, my portfolio overall total return was 4.43% better than G’s, even though for most of that period I held more bonds/cash.
I do own 16 individual stocks, although two are spin-offs. Why own? I’m the one who takes RMDs and held the larger cash cushion. I decided I needed investments to offset that and wanted higher dividends. I’ve held some of these stocks for 20 years.
There have been some difficult years, 2018 and 2022. The bond route in 2022 had less impact on my portfolio because I own few bond funds/indexes (I prefer individual bonds). However, in fact, our returns were only slightly negative in 2022-2023. I took a high 5-figure withdrawal from my Roth IRA in 2022 to deal with costs associated with a serious disease and relocation. That withdrawal influenced my cash allocation and portfolio value.
Why the performance difference? G’s portfolio is about 43% bonds and cash. It was lower than mine, but the bond component in the target date funds gradually increase. My portfolio has no indexes and is currently 46% cash and bonds, but few bond funds. The bonds/cash was 30% in 2017-2018. I made allocation changes to prepare for RMDs. Since 2018 my portfolio has held more bonds/cash to meet RMD requirements and to provide a multi-year cash-cushion. The recent performance of the S&P 500 has helped G’s portfolio to recover from the bond route of 2022.
About 40% of my stock portfolio is individual stocks, the balance is ETFs/low cost mutual funds. About 25% of my stock holdings are ex-U.S. I haven’t really changed much of anything since 2021, although I did purchase a dividend ETF and a few shares of a rocket company in 2024. G’s portfolio is indexes, ETFs and low cost mutual funds, with a few individual stocks.
Here are a few observations about individual stocks. Owning individual stocks does require an awareness of management and the products. Companies can and do falter, so I generally don’t allow any one stock to exceed 5% of my portfolio. Some of the stocks I own were purchased about 20 years ago. The proliferation of ETFs implies I probably could replace the individual stocks and I have reduced the number of individual stocks I own. For example, I once owned energy sector stocks; today I own an energy sector ETF. There are “high yield” ETFs available, too. About 7 years ago I added Vanguard’s High Dividend Yield VHYAX and Vanguard Dividend Appreciation VIG to our portfolios. However, my stocks pay higher dividends. In 2024 I added Schwab U.S. Dividend Equity ETF SCHD to my portfolio. It has better dividends, but fewer holdings. Possibly a good compromise compared to holding dividend paying stocks.
I do like G’s target date funds. Her 2025 fund is 50/50 stocks/bonds. The yield is 2.89% and it includes 20.3% Vanguard total international stock index. While bond fund performance in 2022 was disappointing, international has helped.
We have saved enough for retirement, so goals for the most recent 10 years have been simple; i.e. beat inflation and maintain or improve the value of our portfolios while taking RMD withdrawals. Our portfolio values have increased each year.
Cash can be a drag, but that cushion has benefits. I avoid chasing yields, avoid darling stocks, sin stocks, etc. I’ve offset the sometimes poor returns for bonds/cash with a growth allocation and dividend stocks. I do pay attention to the stock style diversification of the portfolios and the underlying stock holdings percentages. The Morningstar X-Ray tool has been helpful. I make few changes and avoid emotional responses. I always buy with the intention to hold for at least 5 years. I’ve owned most of my remaining stocks for 15-20 years.
Mark, thanks for this hilarious description of how I and probably many others tick when it comes to our investments. My decision making process for deciding when to have a beer is much less agonizing.
I thought we needed a little light hearted forum post to brighten the mood around here. It’s been a bit heavy all week…it would nearly drive you to selecting a beer 😂
I don’t know if Ireland (right? or UK?) has a step-up in basis upon death like the U.S. has. But if so, at that small of a percentage of your world, it’s not that crazy to hold individual stocks.
You could gift low basis stock to charity or when you die your heirs get a step up in basis to clear all of those capital gains.
In the UK/Ireland we’re fortunate to have a tax-advantaged account that shelters investments without any restriction on withdrawals — with a yearly deposit limit of around $25,000 and no age or time limits on access. The shares in question were originally held within this wrapper, meaning all dividends and capital gains accumulated over the years are completely free of any tax liability. Because of this, I’ll never face a step-up in basis issue with these securities. Between the UK’s two main tax advantaged accounts, a UK citizen has a $100,000 yearly tax advantaged limit which means very few need a standard brokerage account and the worry of CGT.
I’m curious if UK tax advantaged accounts are shielded from creditors and liability suits. In the US, protection varies by state.
It’s a mixed picture. The primary tax-advantaged retirement account has full protection from creditors with one exception: if you put an abnormally large deposit in before declaring bankruptcy, the courts can claw the money back. The secondary advantaged account, with the $25,000 yearly limit, isn’t considered a dedicated retirement account and is fully accessible to creditors.
Thanks Mark.
To each, their own. But personally, I would sell both stocks in a heartbeat. I just couldn’t let my brain be consumed by something that won’t actually have any material impact.
I too own two individual stocks, both utilities. One is 40% of my brokerage account. Not good idea I know, but I can’t let go for two reasons. I like the dividends and I didn’t purchase the shares. They were accumulated over several years as part of my total compensation. There is an illogical attachment.
The problem is on any given day there can be a large impact on my account balance. Yesterday was great, today the market took it all back. 😢
40% of your brokerage account in two stocks? I couldn’t stomach that. If you’ll pardon the expression — it must be up and down as often as a hooker’s drawers!
Well it was until it’s down $23,000 today 😡 Just one stock not two. But it’s only 20% of total investments. Does that help much? i guess not.
From what I understand, you have the good fortune of not needing to draw from your portfolio. So, I guess that makes it easier to manage the ups and downs, particularly the downs. After all, a loss is only fiction until you sell and make it reality.
Yes, good point. You could call it good fortune or sticking with one company for fifty years to accumulate a good pension. I don’t think I could cope with relying only on investments for our income.
What I probably would do as I do with our income and that is isolate funds by purpose. As I have mention, we have brokerage and retirement accounts. They are about equal in value. If I relied on one for income I suspect investments would quite conservative. Even now overall we are about 45% bonds and cash.
If I had a concentrated position with large gains that I didn’t need to sell, I’d probably forget about it and leave it to my heirs. Then they can immediately sell it for no gain.
Exactly my thinking at this point. In the meantime I’ve stopped reinvesting dividends and am building up more cash which it appears will be used to remodel our kitchen – or so I’m told. 😁
Kitchen remodel. Done that two years ago. For reasons I still can’t fully explain, and believe me, I’ve tried, we needed a new slate floor to complement the kitchen. Which made the floor thicker. Which meant the kitchen door no longer fit. Which meant the hall floor was suddenly at the wrong level. Which meant the hall floor had to go too. Which meant… well, you can see where this is going.
One thing, as it turns out, is never just one thing.
Needless to say, I now meet any suggestion of further remodelling with the same energy a man brings to defusing a bomb — very carefully, and with a firm “no.”
I hear you. We remodeled the kitchen and two bathrooms in our vacation place. We started with an estimated cost and because of our (Connie’s) modifications along the way, the final cost had no resemblance to the estimate.
One tactic I have read that makes sense in situations like this is to make a 50 percent move.
That way if things go bad, you can call yourself a genius for not holding it all.
And if things go well, you can call yourself a genius for not selling it all.
Either way, you are getting yourself slowly out of the position that is causing unnecessary worry.
I like your thinking. Any strategy that makes me seem like a genius no matter which way the chips fall is a winner 😁
Thank you, Mark. I feel better knowing I am not alone. You described my own situation very well, and this individual share holding (Microsoft), the only non-index shares I own, has taken up my headspace for the two weeks. Why can I not just leave it alone or sell it? Do I want to pay capital gains on it, or should I save it to allow a higher Roth Conversion?
Another question for me also follows: Should I re-invest the proceeds in an index fund, or keep it in a money market as part of my cash reserve? Which then makes me wonder: How much cash do I really need? Some advise five years to help avoid any sequence of returns risk, others three years, and even others one year.
That said, I still sleep well. No rush on this. I am having fun doing the research!
Microsoft, I can understand why it occupies your thoughts. Nothing sharpens your focus quite like owning a piece of a business that’s ultra-sensitive to the whole imponderable tech question! One of my individual positions is currently trading around $8 — though I read an analysis yesterday putting fair value at $14, which is exactly the kind of thing that gets me down these rabbit holes in the first place. Clearly I need to stop reading about my own holdings. I went very suboptimal with my cash allocation and overdid it on the duration, five years. But I’m expecting that to give me some Zen-like calm when my first market downturn hits in retirement.
I just looked – I own 56 different securities. Do I worry much? No.
What would drive me crazy would be owning a fund. I’d be looking at each stock in the fund and thinking do I really want to own that one? Isn’t it a not-so-great company, rather overpriced?
Wow! More power to you. I’d say you are a real investor. What you describe would drive me nuts.
The way I look at it making the decisions on what and when to invest in a stock is the job of the fund manager. I can’t say I even know what stocks are in my mutual funds.
“I can’t say I even know what stocks are in my mutual funds.”
I can look up what percentage of every stock position is in my Morningstar Portfolio Tracker. I have a very diversified stock portfolio via index ETFs with 30% of my total portfolio in domestic stocks and 15% in international. My largest position per Morningstar is 1.6% of Microsoft, so even it goes under it would be nothing but a small blip on my investing radar. I don’t pay any attention to any company, just how the markets in general and my portfolio perform.
In keeping with my basic portfolio mechanics today I had to raise some cash. I simply looked and noticed that my domestic and international equity positions were both 1.5% above their target percentages, and my bond position was 1% heavy. I simply sold back to my target percentages and went on with my life (right now mostly watching the Olympics.
Well, I am the president of the investment club here in my 55+ community, and give presentations on how to analyze stocks.
So, I guess the question is. How do your investments stand up to the Index funds performance?
My aim in the my personal portfolio is to be more conservative than the S&P 500, since I am already wealthy and don’t need gains. A defensive portfolio like mine minimizes losses when the market goes down.
You can look for growth in your 20s and 30s, but when you get to your 70s and 80s capital preservation is more important.
Oh my — it really does highlight how differently we’re all wired. Personally, I’ll take the good with the bad in an index fund just to keep my sanity. That said, I completely get why you’d rather pick individual stocks if the alternative is lying awake at night second-guessing the quality of thousands of securities you’ve never chosen. Both approaches are valid.
Do you track your individual holdings in a spreadsheet? I know someone who has theirs linked to a live data reporting service, so he’s always working with near real-time figures directly inside his sheets.
I have a spreadsheet, but I type the prices in. This allows me to see how things are going.
But large-cap dividend-paying blue chip stocks seldom get into real trouble. They go up and down depending on how business is, but it takes a long time to turn into a real dog.