The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Diversification conundrum||Date: 5/10/2006 5:54 AM|
|Author: quilleute||Number: 86757 of 122300|
(Cross posted from retirement and ask afoolish question)
Hi, I find myself between a rochk and a hard place regarding what to do with a large holding in a single company and would appreciate hearing boardmembers' input.
BACKGROUND: After 30 years of marriage, I am recently and amicably divorced at age 58 (june). As Part of the settlement, I was awarded 3000 shares of Microsoft stock in a taxable account (inheritance). Except for our stock holdings and the house my wife and had few assets, but essentially no debt. I have $10,000 in a Roth and now have an additional ~$60,000 that plan to invest in a diversified portfolio of (mostly) index funds/ETFs.
Since the divorce, I have carved out time to carefully educate myself on investing (including the 4 pillars, A random walk down wall street . . etc etc.) and would like to diversify that Big Lump(PROBLEM #1) in MSFT
PROBLEM #2 of course is that if I sell large chunks of it I will be hit with a big tax bite (15% tops in my case) that may negate any long term benefit of diversification. Alternatively, I could opt to shed small enough chunks on a yearly basis to hold the CG taxes to 5% but that would stretch out the reinvestment period.
I could also just hang on to the entire 3000 shares, but I recognize that eventually I will need to sell a substantial chunk of it to feed my face (so to speak)and will have to pay the CG taxes anyway, perhaps when I am less able to afford them (my income is modest).
I simply have not been able wrap my brain well enough around the tradeoffs between the options to make a decision regarding the MSFT. I would GREATLY appreciate any input that discussion board Fools can offer, including options that have not occurred to me.
Thanks for your time and input,
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