Investing is scary. Even when you’re diversified and even when you buy stock in megacap companies that pay stable dividends, it’s scary. I don’t like it. But I’m just as scared of not having enough money in retirement with my Bank of America riskless CD earning a whooping .35% interest.
A few weeks ago, I sold 69.7 shares of OSTK, taking a $450 hit. I’ve realized that while “buy and hold” is an overall good strategy (I’m not planning on becoming a day trader or options speculator), there are many times when companies are not doing well, and aren’t going to be doing well for a while. Granted, I shouldn’t buy these companies in the first place (I’ve learned that too), but I made some of these mistakes early on in my investing career. OSTK was one of them. $1000 spent, down to $548.54 in 6 months. Luckily I only owned 70 shares of it.
The one stock that has been killing my whole portfolio is COMV. I kept hoping it would go up again… I’ve dollar-cost averaged down from $18 to a point where I owned 1200 shares for an average of $5.05 a share. Unfortunately the stock kept tanking, even as I added to my position thinking it couldn’t get worse, it got worse. I’ve invested $6452.46 into this stock that is now worth $1828.74. A $4623.72 paper loss. Ouch.
Even though my overall portfolio is still up 5.8%, the $4.6k loss is really weighing down the average gains. After reading a little more about the company, I decided it’s time to tell and take the losses. The question is — do I sell all the stock or some of the stock?
I put in an order to sell a little more than half of my shares. It costs $8 to make the trade. I’m tempted to go in and revise the order, and sell off all the shares. I probably should… the company isn’t going out of business tomorrow, but it’s also not profitable, and it faces stiff competition from larger companies. Maybe I’ve answered my own question — I should sell the entire stock and just take the hit. At least I can take $3000 of it as a capital loss this year, and then the remainder next year. Given I doubt this stock is going to make it to $5.00 again to break even, or it won’t for quite some time, I’m better off selling and investing the remaining cash in a larger, profitable business. Or, so I think it is.
Right now I’m going for value growth with a little risk, betting on JNJ, SBUX, CVX, MCD and IHI. I’m a little concerned about dividends in taxable accounts since they count as income, esp if the stock still goes down with reinvested dividends, but that’s better than betting on a micro-cap stock down 70%!
My account is weighted too heavily towards tech stocks (AAPL, AMZN, CSCO), which I realize is just asking for trouble, so I’m going to focus on diversifying to retail, energy and medical stocks in 2012. Also, I need some more international exposure, though I’m unclear exactly how much international exposure I have across all of my sub portfolios. Maybe I should invest in China. Hmm.
Maybe time to take the losses so you can use the tax write-off to pay some of your legal costs mentioned in other posts.
I already took the losses, and will be deducting the $3k max allowed this year.