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Sell or not sell

General discussions about equity high-yield income strategies
Lootman
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Re: Sell or not sell

#244403

Postby Lootman » August 15th, 2019, 3:03 am

Gengulphus wrote:what I said was simply to explain why I won't engage with you in discussing pyad's motives, so that you would know that I wasn't simply missing your point.

I am perfectly happy for you not to join in me in such a debate. I was simply stating that where a contributor here has a financial interest in the topic, then their motives may be relevant in order to support anther TLF rule, i.e. that this forum not be used for the purpose of marketing a business under the guise of giving advice.

Moderator Message:
Pyad's interest in HYP, commercial or otherwise, is well known. Further discussion should be avoided, please. -- MDW1954

Gengulphus
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Re: Sell or not sell

#244404

Postby Gengulphus » August 15th, 2019, 3:16 am

Lootman wrote:By the way, and do please correct me if I am wrong here, but I recall from some other posts of yours that this particular share position you accumulated was via some kind of ESOP or stock option plan in your employer. If so then this was not an investment in the normal sense of the word that we use here. Not that that invalidates your experience but it is very different from the active investment choices that most folks here make. It seems to me quite likely that you would not have built such an outsized position in normal investment activity, but rather it was thrust upon you.

I don't see that how I got the outsize position is relevant, so I see no need to either correct your recollection or confirm it. The fact is that I did get the outsize position, and when it became too big for my taste, I made the active investment choice to trim it - and active investment choices to trim outsize positions are what we're talking about here, not the active investment choices (if any) that led to one having the outsize position in the first place. I ended up very glad that I didn't adopt a rigorous "always run your winners, no matter what" policy, and firmly convinced that any sane investor has some point beyond which they will trim an outsize holding - though it may well be above anything they regard it as remotely conceivable that the investment will reach.

And I'm also of the view that anyone who acquired shares in a tech company before the tech bubble and saw them grow massively to an unsustainably outsize position in the bubble had the outsize position thrust upon them rather than having built it up in normal investment activity. The thrusting has been done by the market rather than (or as well as) the employer as in the cases involving employee share schemes you mention, but both strike me as highly abnormal ways for one's investments to grow.

Gengulphus

Lootman
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Re: Sell or not sell

#244536

Postby Lootman » August 15th, 2019, 2:37 pm

Gengulphus wrote:
Lootman wrote:By the way, and do please correct me if I am wrong here, but I recall from some other posts of yours that this particular share position you accumulated was via some kind of ESOP or stock option plan in your employer. If so then this was not an investment in the normal sense of the word that we use here. Not that that invalidates your experience but it is very different from the active investment choices that most folks here make. It seems to me quite likely that you would not have built such an outsized position in normal investment activity, but rather it was thrust upon you.

I don't see that how I got the outsize position is relevant

It may not have been relevant in your case. But it was in my case, for a few reasons:

1) There was a lock-in period (5 years) before the shares would vest. I could not sell them until that 5 years were up. So I could not trim the position even if I had wanted to. That said, the company was already public, so I could have bought an equivalent number of put options to effectively hedge the outsized position, although some employers do not allow their staff to short its shares.

2) The grant of shares was free, i.e. issued at no cost to myself. So I might view the position differently to one where I had paid out cash to establish it. In a sense I could not ultimately lose any money and so that might inform my approach to risk.

3) As I recall the profits from the position were taxed as income rather than a capital gain. That might also influence when I sold them and at what price.

4) Psychologically I did not think of this holding as being in the same "bucket" as my other holdings. It was really its own thing and so was measured and managed in a different way. I regarded it more as a punt using the house's money than an integral part of my portfolio. As I suggested earlier, it felt more like gambling or running my luck with "free money" that I had done nothing to deserve other than have the random good fortune to work for a company that happened to do well.

All that said, I think we agree on the basic point - that a single position can reach a certain critical size where it is more prudent to trim than to rather mindlessly let it go where it may.

88V8
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Re: Sell or not sell

#244711

Postby 88V8 » August 16th, 2019, 10:23 am

OH worked for Glaxo and predecessors and by share schemes and purchases built up a holding that at its peak contributed roughly a third of our dividend income.
Eventually I persuaded her that it should be trimmed, a gradual CGT-related process now completed.

Whether I would have done so had GSK not seemed so ropey, is another matter.
If I were that much overweight Shell, for instance, I would probably let it run.
But then, I can afford a few casualties. Different if finances were tight.

V8

Itsallaguess
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Re: Sell or not sell

#244807

Postby Itsallaguess » August 16th, 2019, 2:51 pm

88V8 wrote:
OH worked for Glaxo and predecessors and by share schemes and purchases built up a holding that at its peak contributed roughly a third of our dividend income.

Eventually I persuaded her that it should be trimmed, a gradual CGT-related process now completed.


You don't say if your OH was still working for Glaxo when you decided to diversify away from such a large dividend-income-provider, but with SAYE share-schemes it's important to remember that whilst you're working for them at the same time, then the potential 'income-hit' should the company take a really large 'stumble' might well be much more than that purely provided by the 'dividend-income' alone....

I think if still working, it's always sensible to try to diversify away at least some share-holdings that are built up in this manner, so long as they are 'available' to do so without incurring any potential tax penalty.

Don't forget that working wages might well be as vulnerable to cuts as dividends....

Cheers,

Itsallaguess


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