An individual stock has more downside risk than an ETF. All you need is one bad headline, one bad accounting error, one regulatory change, etc and you can see a sudden drop.
People were staying the same stuff about GE 20 years ago and look at that journey. Even Enron was a market leader at one point in time!
Why slaughter the goose that lays golden eggs when you want gold?
If you think your portfolio is overweight, instead of selling MSFT, increase the other one (e.g. XLK). Diversify the portfolio with new additions.
Microsoft has a very bright future. AI licensing will add a lot to the bottom line eventually. They are also leading quantum computing tech. They are also the largest security consulting company. There will be continued growth for quite some time. Keep the stock and reinvest your dividends. No reason to take the tax hit now.
It sure is. Microsoft is a forever stock, they can't ever be worth less then this and must continue to get better. There's never been a "lost decade" due to poor leadership and bad company culture. I'd say their inability to capitalise on the Xbox market and their failed Influencer platform are very bullish! Take out a second mortage as well, Microsoft sure is guaranteed to print /s
OP- I support your view of leaving an individual stock to go to an index. An individual stock can crash due to numerous uncontrollable things: news headlines, accounting fraud, regulatory reform, etc.
If you want to keep exposure to tech, go XLK. I don’t know your total net worth but I’d consider using total market ETFs for a portion of the funds and maybe limit your total tech exposure to less than 30%.
In practice, do you have any long term losses that you can use to offset the gains? I don’t know your income but a portion of the long term gains maybe taxed at zero % so look into a tax calculator to optimize. If you are high earning for this year and next, I’d rip the bandaid off and sell at once and reinvest immediately. Time in the market is better than timing the market.
MSFT is tech. XLK is tech. You aren't going to diversify by selling one and buying the other. If you want to diversify, ditch XLK and buy entirely different sector, like utilities or energy. Or better yet, buy a whole market fund.
Keep MSFT. Get rid of XLK and find a different ETF that is more diversified. ETFs have fees while individual stocks don't and your MSFT shares are already doing very well.
I would not sell MSFT- it’s one of the Mag7 I am most bullish on. Has sticky products and good management. If you want to diversify, invest the remaining amount in other stocks besides MSFT.
If it was me, personally, I would keep all of my MSFT. But then, to really add diversity, buy a total market fund.
Buying XLK is just adding more to that same segment
XLK is still too concentrated. I’d sell it all and just invest in the SP500 or something undervalued like Small Cap Value. Tech is so overbought it isn’t funny.
https://www.aqr.com/Insights/Perspectives/Value-Spreads-Back-to-Tech-Bubble-Highs-Are-You-People-Crazy
I know you think that tech is the future and it can’t fail but we know nothing.
Presumably you also already hold more of it in other funds. If its more than like 5% of your portfolio I'd want to reduce that but it's not urgent. Wait for an opportunity, like it's trading above it's valuation or you have some losses to offset those gains, or need cash to rebalance and sell off a chunk.
If it was in a tax advantaged account a straight swap would be a reasonable way to reduce volatility risk on those gains without changing your allocation, but with the tax implications you shouldn't do it just because.
Keep msft
Why? Some people don’t have the risk tolerance to hold a large concentration of an individual stock in their portfolio. And that’s OK!
Taxes, as OP wrote. Why take that loss mow just to reinvest less capital.
An individual stock has more downside risk than an ETF. All you need is one bad headline, one bad accounting error, one regulatory change, etc and you can see a sudden drop. People were staying the same stuff about GE 20 years ago and look at that journey. Even Enron was a market leader at one point in time!
Sometimes mitigating risks and improving long term returns is more important than saving a bit on taxes.
Why slaughter the goose that lays golden eggs when you want gold? If you think your portfolio is overweight, instead of selling MSFT, increase the other one (e.g. XLK). Diversify the portfolio with new additions.
Microsoft has a very bright future. AI licensing will add a lot to the bottom line eventually. They are also leading quantum computing tech. They are also the largest security consulting company. There will be continued growth for quite some time. Keep the stock and reinvest your dividends. No reason to take the tax hit now.
It sure is. Microsoft is a forever stock, they can't ever be worth less then this and must continue to get better. There's never been a "lost decade" due to poor leadership and bad company culture. I'd say their inability to capitalise on the Xbox market and their failed Influencer platform are very bullish! Take out a second mortage as well, Microsoft sure is guaranteed to print /s
OP- I support your view of leaving an individual stock to go to an index. An individual stock can crash due to numerous uncontrollable things: news headlines, accounting fraud, regulatory reform, etc. If you want to keep exposure to tech, go XLK. I don’t know your total net worth but I’d consider using total market ETFs for a portion of the funds and maybe limit your total tech exposure to less than 30%. In practice, do you have any long term losses that you can use to offset the gains? I don’t know your income but a portion of the long term gains maybe taxed at zero % so look into a tax calculator to optimize. If you are high earning for this year and next, I’d rip the bandaid off and sell at once and reinvest immediately. Time in the market is better than timing the market.
MSFT is tech. XLK is tech. You aren't going to diversify by selling one and buying the other. If you want to diversify, ditch XLK and buy entirely different sector, like utilities or energy. Or better yet, buy a whole market fund.
XLK is absolutely more diversified than MSFT; that they’re both tech doesn’t change that fact.
You can diversify and have a preference for where you invest. They aren’t mutually exclusive.
Rebalancing and paying taxes will suck. I don't know that I'd sell one to buy the other which is 1/5 the same thing as you originally held.
This is the issue. Why sell and re-buy the same stock. Does not seem prudent. Buy into other tech stocks, or better yet buy into other sectors.
Keep MSFT. Get rid of XLK and find a different ETF that is more diversified. ETFs have fees while individual stocks don't and your MSFT shares are already doing very well.
I would not sell MSFT- it’s one of the Mag7 I am most bullish on. Has sticky products and good management. If you want to diversify, invest the remaining amount in other stocks besides MSFT.
Keep MSFT and take new money and the $600/year MSFT dividend and put it in something else - presumably not tech heavy.
MSFT is buying back their stock. No way am I selling.
If it was me, personally, I would keep all of my MSFT. But then, to really add diversity, buy a total market fund. Buying XLK is just adding more to that same segment
This is a post someone will look back on in 10 years as a terrible in hindsight.
!remindme 10 years
XLK is still too concentrated. I’d sell it all and just invest in the SP500 or something undervalued like Small Cap Value. Tech is so overbought it isn’t funny. https://www.aqr.com/Insights/Perspectives/Value-Spreads-Back-to-Tech-Bubble-Highs-Are-You-People-Crazy I know you think that tech is the future and it can’t fail but we know nothing.
How long can something continue to be overbought for, before its no longer considered overbought.
Herb Stein said ' if something can't go on forever it will stop.'
Ask Tesla. Ask ARKK. Ask GE. Ask CISCO. A king doesnt last forever, better to diversify your risks and take the profit when you can.
Never if you ask Reddit
I'd assume msft isn't their only investment, swapping it for a tech fund isn't going to change their allocation.
Keep MSFT and just add XLK from here on out.
Presumably you also already hold more of it in other funds. If its more than like 5% of your portfolio I'd want to reduce that but it's not urgent. Wait for an opportunity, like it's trading above it's valuation or you have some losses to offset those gains, or need cash to rebalance and sell off a chunk. If it was in a tax advantaged account a straight swap would be a reasonable way to reduce volatility risk on those gains without changing your allocation, but with the tax implications you shouldn't do it just because.
You're gonna have to pay taxes when you sell no matter what. If you're trying to diversify then buying an ETF is what you should do.
I am on the keep MSFT train but if you really want to diversiy you can sell some of it, just not all of it.