I agree, nearly all “high quality” stocks seem over-priced to me. I have a policy of holding an individual stock until it reaches about 6-7% of the total portfolio (used to be 10%), and my AAPL holding is RIGHT there, at 6.5%. I’ve not sold any (yet), but if it continues to rise, I will trim it down. I also do not “add” to a single stock position if it gets over ~3% of the portfolio. Our MSFT position is at ~4.96%, so not adding there.
The rest of our individual stocks are between 0.5%- 3% positions, so less “single stock risk”. One of the reasons I have NOT sold AAPL, MSFT, as well as any of our other “higher percentage” positions is due to tax issues- HUGE unrealized capital gains. My AAPL has a cost basis of $11, MSFT has a basis of $9.26, AMGN basis of $39, PYPL basis is $7/share, XOM has basis of $2/ share, JNJ basis is $10/ share, and BRK.B has a basis of $2/ share. As you can see, many of these were bought decades ago, and we have tax “handcuffs” with them.
If the Dems eliminate the step up in basis, my heirs are screwed!
I'm not suggesting how others spend their money, just merely sharing alternatives when the taxable gain becomes so high. One option I've used is a Charitable Remainder Trust. These are best used in the form of second-to-die (when there is time on your side). You gift the appreciated assets to your school and they pay out a certain percentage every year until the last person dies and then they get the Remainder. It can become a win-win when the asset appreciates over time. The one I have is invested in the school's investment fund. So, if they do well, you do well. Of course, the immediate tax benefit for the gift is also helpful. This is MOST helpful with highly appreciated assets. Only downsides are that (1) the gift obviously reduces what your heirs might get and (2) the quarterly proceeds are taxed at your ordinary-income rate.
Of course, another option is simply to just give the asset to the charity. I've done that as well and enjoy that the gain goes untaxed.
Great topic. I’ve been “selling” Apple, as well as Visa, for years—keeps breaking my target caps for individual equities. I would put the profit in cash, but then kept breaking cash targets. Not a bad problem to have-wish all my individual equities had fared so well as them I wouldn’t be sweating over every dollar I have.
I’ve decided to let it ride unless there is a material change in its business prospects, regardless of allocation. If I need to sell again, I’ll put the proceeds in low maintenance conservative allocation funds. Trying to keep it simple while still allowing some growth beyond cash.
I want to thank everyone who has contributed to this thread. I have a nice short list of stocks I will consider buying this week. Right now that list includes MSFT, INTC, AMGN (less likely because I already have a lot of Pharma stocks), HON, TXN, V.
The purchases I make will depend in part on prices for the stocks I'm interested in next week.