Your friends are partly right. You should have no more than about 4% of your total portfolio in one stock - there is way too much risk. So assuming this is a large part of your portfolio, you do want to sell off a large proportion.
The US stock market is doing well, and likely to continue to do so for the next 12 months. However, buying individual stocks without a huge amount of research typically leaves new investors losing money.
You would be far better re-investing the money in a series of mutual funds. I would suggest a portion in a total stock market fund, another percentage in a good bond fund, some in a good international growth fund, and maybe some in sector funds - utilities and healthcare are both solid areas.
Mutual funds spread the risk by investing a very large pot of money (usually billions) that thousands of investors pay in. They invest in a broad range of stock with a specific investment target.
Your age, risk tolerance, and other items determine the exact mix that would work for you.
I would suggest chosing a company (I use Vanguard, but Fidelity, T Rowe Price and others are all good) and transfering the stock into an account there. You can then start selling off the stock to purchase mutual funds.
In the Vanguard family, if I were you, I'd probably go with 50% in the Total Stock Market Index, 10% in the International Value Fund, 5% each in Mid-Cap Growth Index and the Small-Cap Index, and then 30% in the High-Yield Corp Fund (bond fund).
I'd agree with the advice earlier. Although I don't think a financial planner is necessary, but if you get one, FIRST make sure he/she is fee-based, not commission driven; and then tell them you are not interested in any funds with front or end loads, or management fees above 0.4%. That will keep the advice safely within range. Also tell them you are only considering mutual funds, and that you are not interested in individual stock trading, or specialist sectors like hedge funds. Absolutely ignore any suggestions of annuities.
2007-07-02 15:23:37
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answer #1
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answered by Anonymous
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Hey there,
Well the good news is that since you inherited the stock, under current tax law, your new basis in the stock is what it was worth at the time of death of the person who gave it to you. If the stock was pretty close to $330,000 when you inherited it, that means you will have minimal capital gains tax impact if you sell it.
The question then becomes what do you do with it now. It definitely makes good investment sense to diversify your portfolio. Having just $330,000 of one stock is a recipe for future investment disaster (just look at Enron). The actual mix of investments though is the key question. That will depend on a lot of things. How comfortable are you with short-term risk (the ups and downs of the stock market)? What do you want to invest this money FOR? Retirement in the future? INcome right now? College for the kids? A combination of things? What other assets do you have already? How are they invested? What income do you get from your job or other sources?
This is a lot to consider. You might want to get an opinion from a financial planner. But I believe if you take some time and do some research of your own, you can come up with a good portfolio of your own. Here are just a few ideas:
(1) Stick with no-load, low expense mutual funds, especially when purchasing stock mutual funds. If you are relatively conservative, all you might need is about 30-40% in an S&P 500 Index fund, like the Vanguard Index 500 as an example. If you're more aggressive, find two or three other quality mutual funds that focus on small company stocks and international stocks that will be a little riskier, but will give you more potential return.
(2) Have a good, solid bond fund -- one that invests in relatively safe U.S. Treasury bond, agency bonds (GNMAs, FNMAs, for example) or high quality corporate bonds. Don't go for the "high yield" stuff that is riskier and has poor credit quality. If you're conservative, put in about 50-60% in that (less if you're more aggressive)
(3) Finally, put 5-10% in a money market fund. This gives you maximum principal stabilty and income for a part of your portfolio, no matter if stocks go up or bonds go up.
I personally doubt the U.S. stock market is going to experience a significant correction (more than 10% down) in the next 12 months or so. It's not out of the realm of possibility, of course. But your best protection, even if that happens, is NOT to keep the Abbott stock. Diversify and that will lessen the bad times and (hopefully) keep the portfolio going strong in the good times.
Good luck, man
2007-07-02 15:38:01
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answer #2
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answered by Bryan A 3
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Abbott Laboratories is a good company to own stock in. It has a 4 star S & P rating. The company also pays dividends quarterly. Dividends are a very important part of an investment that you plan on holding on to (rather than actively trading). For example, if you have 10,000 shares of Abbott and they pay a quarterly dividend of $1 per share (example only), then you would have income of $10,000. If you reinvest that dividend then you would have more shares of Abbott, and thus larger dividends, to keep reinvesting. At the same time, the price of Abbott may continue to rise, which increases the value of your holdings. Of course you could take the dividends and put that money into other investments such as bonds, cd's, or mutual funds. This is a good stock whose price has done quite well over the years. I'd keep it, but if it was my only investment I would spread the risk out a bit by taking the dividends and putting them in other investments.
2007-07-03 11:50:04
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answer #3
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answered by lynn 2
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Michael F asked a pretty good question, and when you read some of the questions here, you do have to wonder about the quality of the answers.
Having said that, there are some very smart people who are very happy to answer the sensible questions. It is going to be up to you to judge the quality of the answers.
The basic message you have received so far is diversify, do not keep all your eggs in one basket. Of course, it is also possible that you will sell 80% to 95% of this stock and it will double over the next two to three years. Wating for this to happen is gambling,but you never know you could win.
What you choose to do will depend on your curent circumstances and whether you need to pay off any debt or have other immediate expenses to take care of.
If you have other investments you will probably want to adjust your allocations. Again your circumstances and risk profile will be different from mine, but I will tell you my current balance.
Low Risk - Bank - Returns 4%-6%
Medium Risk - Mutual Fund / Index Fund - Returns 8%-12%
High Risk - Individual Stocks / Strategies Returns 20%+
My split is 30-40-30 Low-Medium-High
However using the stockmonthly system, my high is growing faster and my profile is changing because of that.
2007-07-03 01:28:01
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answer #4
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answered by Anonymous
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I don't know what the rest of your portfolio looks like, but it sounds like you're a bit heavy in the Abbott Labs stock. I generally agree with the other poster about seeking advice from a financial planner. You can find a certified financial planner (CFP) at http://www.cfp.net. I would recommend finding a fee based planner, meaning that you'll pay by the hour for services, not commission based. If you want to get started a bit more easily, you could contact Charles Schwab for professional advice. Some of it comes free, but they do offer financial planning for like $500-$1000, too.
Remember, the key to financial success within your portfolio is diversification. Slow and steady wins the race on this one, not market timing.
2007-07-02 14:48:50
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answer #5
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answered by SuzeY 5
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I'll join in some speculation.
My own valuations of ABT as I remember them were that ABT was fairly priced already in the 58$ range. I would have gotten out as soon as the up-trend was ended by the price crossing the 50-day Moving Average ($57). Now it's at $54, 10% below the high. Personally, and this is pure speculation, I think there are better opportunities than ABT.
2007-07-02 17:42:52
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answer #6
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answered by trancevanbuuren 3
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There's been some really good advice before me, so that means I'm free to give you some really bad advice.
Sell your Abbott stock and give me the money. I'll guarantee you a 20% return and no fees. Hey, it's found money, take a chance.
Really though, follow the advice before me, and you should do ok.
2007-07-02 17:33:10
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answer #7
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answered by Timon 2
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I am a Portfolio Manager with over a decade of experience in the Stock Markets and I suggest you to sell at least 80% of your current holdings and invest in stocks.
If you need more detailed FREE information just let me know.
2007-07-02 17:40:50
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answer #8
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answered by Anonymous
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my best advice to you would be to have your situation evaluated by a competent financial advisor. collaborate on a plan considering your overall tax and financial situation. no one could or should give advice without knowing specific details of your situation. generally speaking, diversifying out of a single position(if abbot is the only investment you own) would be a great idea. since the stock was inherited, you own it at the cost basis on your benefactors' date of death, so there's a tax advantage for you.
2007-07-02 14:47:49
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answer #9
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answered by ny2fl 2
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I agree w/ Slam
And, I would diversify anyway. The risk of being in one stock outweighs the risk of a diversified portfolio.
2007-07-02 14:44:22
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answer #10
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answered by scott.braden 6
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