I’ve bounced around the idea of selling out all of my positions in my brokerage account and some positions in my IRA and Roth IRA. When I woke up Friday morning and saw that the market was once again up, I decided to execute my strategy. I’ve sold all but one stock in my brokerage account. I also sold a handful, well two handfuls of stocks from my IRAs that were overvalued, or that I don’t want anymore. Additionally, I sold some positions where I owned less than 100 shares. I did this because moving forward I’d like to own at least 100 shares of every stock in my portfolio. This is so I have the option of selling options if I choose to do so. I have a few open option contracts. I didn’t want to pay to close these, so I left any stock in a contract alone.
Why The Selling Spree
It’s no secret that markets are very hot, way too hot in my opinion. I don’t see this bull run lasting much longer. My crystal ball tells me that there’s a big correction coming sometime in the next 3 to 6 months. Normally, I don’t mind weathering the storm, but since I planned on switching brokers from Capital One Investing and Schwab to Interactive Brokers anyway, I decided to act now and capture gains. I’m not saying that I think the market is going over a cliff, but I firmly believe there will be a sizable correction. I just chose the car going off a dock image because I thought it was funny :-).
I sold out of 19 stock positions today. The total market value of the shares I converted from stocks back to cash totaled $71,887. My cost basis on this lot was $60,206. I realized earned income of $11,680. Not all of this income will be taxable, now or ever, because some of these stocks were held in my IRAs and Roths.
Brokerage Account Selling Spree
Capital One Investing is the broker I use to invest after tax money. I sold every stock position except for National Oilwell Varco (NOV). I didn’t sell this stock because I have a covered call open with an expiration date of January 20th. This contract is now upside down. I’ll wait until it recovers or I’ll allow the contract expire and let the stock get called away. I bought NOV early last year before the energy sector tanked. I’m very underwater on this stock. When I do unload it, it will be a tax harvesting move.
From my Capital One Investing account I sold the following positions:
Wal-Mart (WMT) – 63.9716 shares, at a profit of $815.47
Union Pacific (UNP) – 50.0497 shares, at a profit of $778.46
Target (TGT) – 47.6487 shares, at a profit of $343.47
Toronto-Dominion Bank (TD) – 35.0618 shares, at a profit of $26.31
General Electric (GE) – 50.1255 shares, at a profit of $328.50
Royal Bank of Canada (RY) – 28.5262 shares, at a profit of $72.78
Qualcomm (QCOM) – 55.3888 shares, at a profit of $746.19
Cisco (CSCO) – 104.1918 shares, at a profit of $344.88
Altria (MO) – 41.0703 shares, at a profit of $1,162.33
The good news is that I made money on every stock. The bad news is that this is a taxable account. Total gains came to $4,618.39. I will pay taxes on this amount. The silver lining is that NOV is at a loss. If NOV was sold today, about $2,000 would be a loss. I will sell NOV before December 31st, then I’ll close this account. After these sales, the cash value of this account is $28,769.97. I’ll use these funds to open a personal account at Interactive Brokers.
Roth IRA Selling Spree
It wasn’t really a selling spree for this account. My two largest positions, Philip Morris (PM) and Realty Income (O), are tied up in options contracts. I probably would’ve sold Realty Income if it wasn’t in contract. From this account I sold out of 2 positions.
Ameriprise Financial (AMP) – 19.1469 shares, at a profit of $247.66
Costco Wholesale (COST) – 14.1942 shares, at a profit of $259.87
The sale of these two stocks added $4,214 of cash back into my Roth IRA. Of this amount, $507.53 is profit.
Traditional IRA Selling Spree
I sold out of 8 positions in my IRA account. I let go of some big names. I plan to repurchase most of the stocks that were sold, but I’ll ease my way in by taking advantage of dips and selling puts.
Amgen (AMGN) – 40.7396 shares, at a profit of $1,533.85
Apple (APPL) – 45.7422 shares, at a profit of $105.04
Chevron (CVX) – 31.4763 shares, at a profit of $72.50
Cummins (CMI) – 51.3991 shares, at a profit of $993.08
International Business Machines (IBM) – 41.8585 shares, at a profit of $1,392.39
Johnson & Johnson (JNJ) – 62.1634 shares, at a profit of $1,644.08
ONEOK (OKE) – 64.7461 shares, at a profit of $612.34
United Technologies (UTX) – 12.2402 shares, at a profit of $201.20
The total amount of stocks converted to cash came to $40,241. Of this amount $6,554 was profit.
Selling Spree Takeaways and Next Steps
First of all, I must say it felt really good to sell 19 positions. It’s not that I dislike these stocks, but knowing that the capital is safe and that I made over $11,000 in profit felt really good. I plan on moving everything over to Interactive Brokers by the end of 2016. I’ll be doing this in phases, with the first being my after tax brokerage account. I’ll open my new IB account with the $28,769.97 in cash from my Capital One Investing account. Then sometime between now and December, I’ll rollover my IRAs and Roths.
I still have two old Roth IRAs with ETRADE. I’ll close these accounts too. I will keep one Roth, my wife’s account, open with Schwab. This is a smaller account with $13,000 invested. I’m keeping this account because I do really like the free tools that Schwab offers it’s clients.
My purpose for moving to Interactive Brokers is because this broker has very low fees on trades and options. My strategy moving forward relies on selling more options; mostly covered calls on the dividend stocks in my portfolio. Schwab charges me $9.71 per options contract. Since I usually buy to close or carry over contracts, this means I pay Schwab’s fee twice for each contract. $19.42 is way too much money to pay for options. By contrast Interactive brokers will cost me 90% less.
The one thing I don’t like about IB is that it doesn’t offer DRIP investing. This sucks, but there’s a silver lining here too I’ll be paying 90% less on trades too. Once I get all of my money reinvested through IB, I’ll be averaging somewhere around $700 a month in dividend income. At this monthly dollar amount, I’m happy to invest every month or every other month and pay IB’s fees. It’s actually probably better because I’ll be able to selectively DRIP into the stock or stocks that are most undervalued.
I want to be very clear that I’m not changing my strategy and goal of retiring on dividend and options income. I’m just taking advantage of cost savings. My reason for selling a bunch of stock yesterday was partly because I want to capture gains before a correction. But, the primary reason is to save money on broker fees. If you’re a regular reader of this blog, you know I’ve been talking about moving to Interactive Brokers for over a year. My monthly dividend income will drop and suffer over the next few months. However, the extra cash I have in my accounts will allow me to make-up the dividend reduction with option premiums. This is not an ideal situation, but thinking long-term, it’s not a game changer.
Well, that’s it. What a selling spree. Do you think I’m crazy? What do you think of my strategy? Do you use Interactive Brokers? If yes, what do you think of them?
DISCLAIMER – I’m not a licensed broker or agent. Everything I write about should be seen as entertainment and not advice on investing. Do your own homework and take personal responsibility for your actions.