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.