Should I sell my individual stocks and buy a mutual fund

Question

In early 2008, I rolled over a small 401K from a previous employer into a private account and bought a bunch of individual stocks. (Stop laughing)

For a while, it was so bad, the transaction fees to sell everything made it not worthwhile to do anything. Now, due to a couple of the stocks doing really well, it has almost recovered. Plus, I currently have a discount on the transaction fees.

So, should I go ahead and sell everything and put it into mutual funds? Sell high and hold the others?

Some details:

Original investment: $9300

Current Value: $9045 (-3% gain over seven years. Whoo-hoo!)

Stock   Value   Performance Notes

A   $1,302.55   218%    Pharmaceutical company.  Shot up in last two years. Hit all time high a couple of months ago and had come down about 10% since then

B   $1,350.20   168%    International stock.  Similar performance to pharm above

C   $1,020.45   109%    Small cap business services company.  Had quintupled the price I paid for it at one point.  

D   $3,345.84   -1.65%  Regional Bank.  Had been steadily improving since the crash, but has stalled out in the last year

E   $274.55     -10.68% Small restaurant chain. Fairly flat for about 5 years

F   $887.72     -14%    Electonics store.  Rollercoaster since I bought it.  Currently at the top.

G   $902.37     -54.46% Large Bank.  Never really recovered from crash, but has tripled in last 4 years.

CRAP1   <$1 -100%   Not worth transaction cost to sell.

CRAP2   <$1 -100%   Not worth transaction cost to sell.

CRAP3   <$1 -100%   Not worth transaction cost to sell.

Answer 1

I would normally take a cautious, "it depends" approach to answering a question like this, but instead I'm going to give you a blunt opinionated answer based solely on what I would do:

Sell Them All

Even the crap. Get rid of them and get into the boring low fee mutual funds.

I was in a similar situation a few years ago, almost. My retirement accounts were already in funds but my brokerage account was all individual stocks.

I decided I didn't really know what I was doing despite being up by 30+% (I recognize that it was mostly due to the market itself being up, I was lucky basically).

The way I cashed out was not to sell all at once. I just set up trailing stops on all of them and waited until they hit the stops.

The basic idea was that if the market kept going up, the point at which they got sold also went up (it was like a 10% trail I think), and once things started to turn for that stock, they would sell automatically.

Sure I sold some at very temporary dips so I missed out on some gains but that's always a risk with a trailing stop and I really didn't care at that point.

If I had to do it again, I might forget all that and just sell all at once.

But I feel a lot better not being in individual stocks.

Answer 2

This depends on a lot actually - with the overall being your goals and how much you like risk.

Question: What are your fees/commissions for selling? $8.95/trade will wipe out some gains on those trades. (.69% if all are sold with $8.95 commission - not including the commission payed when purchased that should be factored into the cost basis)

Also, I would recommend doing commission free ETFs. You can get the same affect as a mutual fund without the fees associated with paying someone to invest in ETFs and stocks.

On another note: Your portfolio looks rather risky. Although everyone has their own risk preference so this might be yours but if you are thinking about a mutual fund instead of individual stocks you probably are risk averse.

I would suggest consulting with an adviser on how to set up for the future. Financial advice is free flowing from your local barber, dentist, and of course StackExchange but I would look towards a professional.

Disclaimer: These are my thoughts and opinions only ;) Feel free to add comments below.