Keep Stocks or Move Them To Index Fund?

Investing
#1

Hi Jeremy,

Really enjoy your page and insight. Found your IG this weekend and will continue to follow along. My question is what should I do with individual securities that I currently hold?

I started a non-retirement brokerage account with Fidelity (same as employer 401K) to start investing earlier in the year. I somewhat blindly bought $1,000 of a few blue chip stocks (Nike, Microsoft, Verizon, etc.) at the beginning of the pandemic. As I started learning more about investing and saving, I now realize that your strategy aligns more with my beliefs and how I want to proceed in investing/saving. Should I sell off the few stocks that I currently have (between all of them I am up ~$60-$80) and move them to an index fund or should I hold on to them and wait until my index fund vs. stock split is 90% to 10% before doing anything with them?

I appreciate any advice or thoughts on what you would do. I do have separate short term goals (house) but would like to simultaneously keep my retirement savings rolling and start other forms of investing.

Thanks!
-Richard

1 Like
#2

Richard,

Excellent job on starting an investing account. Now it looks like you have two goals in mind, a house in the near term, and retirement in the long term.

Based on your investment knowledge and risk tolerance, you can continue to buy/sell individual blue chip stocks. (This would be a good strategy for your near term goal). The benefit of an index fund is that it diversifies the risk of individual holdings.

But the safest strategy would Be to include mutual funds/ indexes funds to diversify risk. That way if one of those companies goes under (which is improbable especially before your near term goal). The value of your investment would not be impacted as dramatically because your investment includes more than one company.

As of today you maybe splitting hairs. So either decision is a good decision. But taking advantage of mutual funds in your account will lower your exposure risk to individual companies.

#3

Without knowing the rest of the details of your financial life, in general I would say yes. On your small gains, the capital gains tax will be almost nothing and I think you are likely to experience better performance and less volatility over the long haul by buying and holding index funds. So Iā€™d switch out now!