Consolidating small Stock holding over many companies

Question

Over the years I have accumulated small stock holding across many companies; some of them are inherited as well. Now the problem is there are around 30 companies stock, with small holdings and values (in one case there is exactly 1 share). It is not possible for me to track the performance of 30 odd companies.

In addition for most of the stocks I have no idea of the actual purchase value and the time of purchase and so cannot calculate the actual returns.

In aggregate this kind of holdings consist about 30% of the portfolio, so cannot be ignored.

Wanted to know if anyone has encountered this kind of situation and what some next steps.

If, for example, I wish to consolidate them, then what are the aspects to look at and consider.

Any help would be much appreciated, as I am kind of perplexed.

Answer 1

If, for example, I wish to consolidate them, then what are the aspects to look at and consider.

The best option is rebalance the portfolio. Generally this is an on-going activity one has to perform else things go out of hand.

Say you didn't own any of these stocks and you had 30% of the money; draw up a list of shares you would buy.

For items in this list, hold the current shares, for items not on this list, sell them and buy whatever you think is shortfall.

For example you have shares of A[5], B[10], C[2], D[1] worth 100.

If you have 100; determine if you would buy any of A-D. Say you think you want to buy A[10], C[5], E[10].

Then sell B, D and use it to buy 5 more of A and 10 of E.

As some stocks may not be liquid, don't try a desperate sell. You can take time and do this over a period of 2-3 months. There is no urgency to do everything in one go.

Answer 2

It sounds like you are unhappy because your portfolio is too diversified for your taste and you want to reduce the diversification. Let's assume for a second that this concern is valid and look what can be done about a 1 stock position. Since we want to reduce diversification of our portfolio we are going to try and sell this 1 stock position.

For small trades my broker basically charges a 2 euro flat fee. For larger trades the variable costs of 0.3% of transaction amount become important, but these are negligible unless your single stock is worth a least 1000 euros.

So let's say you own a stock that is worth 2 euros. Selling it will mean: (1) you no longer own the stock, (2) you have 2 euros, and (3) you have to pay 2 euros in fees. Basically you gave away the stock to your broker; better just hold on to it.

Let's say you own a stock that is worth 200 euros. Now the order fee represents only 1% of the value of the stock, and selling it would leave you with 198 euros.

You should probably look at your own broker's fee structure to determine at what value it makes sense to even think about selling a position.

Finally, the chances of a company eventually going bankrupt are very high and when that happens you will have effectively sold it for the dividend payments. So if you wait long enough, the position may sublimate naturally. Note that this may not happen in your lifetime.