Kathleen Nemetz

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Kathleen Nemetz, Certified Financial Planner (TM) Practitioner
Stay True to Your Strategies, When Pruning Holdings
A short cheat sheet for making that decision to sell.



Ever wonder whether you too should "sell in May and go away?" As goes the old adage?


While market pundits like to signal trends that may validate their advice, the best course may be to continue to hold unless a stock or fund is now off strategy.


Keep in mind that selling stocks or funds can trigger unwanted capital gains and headaches for next year's tax filing.


While investors are advised caution, they should also consider ongoing recalibration of long term strategies as assumptions or conditions change. For instance, most investors have specific goals for yield or growth, or sector diversification. Or for tolerance of volatility. If a portfolio is not paying the dividends expected or is swinging wildly, changes may be in order.


When reconsidering metrics, and strategic assumptions, it's important to identify stocks or holdings that have gone astray. For dividend investors, this may be to periodically root out stocks that have cut dividends or failed to increase them over time. For people who have discovered they have less risk tolerance than they may have assumed when starting, this knowledge may lead to cutting back stocks to substitute more weight in bonds and cash.


Here is a short checklist of factors to consider next time you are wondering if it's time to sell any one holding. It's always important to talk with your financial planner or advisor as well, to see how a decision to reweight a portfolio may change outcomes for financial goals. Also consider a tax consultation, when dealing with a taxable portfolio.


Moving averages


Has the stock or fund trended down below its 50- and 200- day moving average? Is there a rainbow at the end of the tunnel or do analysts now downgrade the stock?




Have your needs for income from your holdings changed? Is income as important to you or more important than is growth? Has the dividend or interest payment continued as expected?


Industry sector


Did you buy into a downdraft of any one particular industry only to discover that the trend is still downward? What is your tolerance for continued pressure down? If you expect another 10% drop is this within your tolerance for risk or should you consider trimming down the position at risk of loss?


Missed opportunities


Are there other opportunities for yield or growth that you could move into now, if you moved out of one or more positions? Are other attractive stocks paying more consistent dividends? Or less exposed to sector risk, than your current holding or holdings?


Lowering volatility


Is your stock or fund zigzagging daily or trending steadily? If it's zigzagging you might consider whether it is appropriate for your overall growth goals. If the stock is a small capitalization company and thinly traded, volatility can be much higher than for a large capitalization stock found in the S&P 500 index. Bonds for which credit ratings have been lowered may be trading at a discount, because of this rating change.


Tax issues


Within an IRA or tax deferred account, there is usually no tax concern to making a change in a holding. The exception might be a limited partnership traded in the open market. For various reasons, any gain or loss may be considered unrelated income and must be matched with the same holding or type of holding.


Within a taxable account, gains and losses can be netted to lower an overall bill for capital gains.  Check with your accountant.



Next class for personal financing planning in June, in San Rafael. Email me for info.



Kathleen Nemetz, MBA, CFP, CDFA™
Financial Advisor

McClurg Capital Corp.
950 Northgate Drive Ste. 301
San Rafael, CA 94903

415.472.1445 x 306


CA ins. lic. 0E71423



Self-help templates available on my website for download. 
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