My Current Taxable Stock Holdings

I haven't summarized my entire stock portfolio recently, but every transaction is usually at least listed in my monthly net worth reports. I figure since the end of the year is approaching fast, this is as good a time as any to take a snapshot of my equity investment portfolio.

Here are my taxable stock investments (held in Sharebuilder, DRIPs, ESPP):

Here is a breakdown of the value of each investment:

Investment

Value*

IBM

$26,669.57

Pfizer

$16,932.15

Merck

$ 5,920.37

Anheuser Busch

$ 4,751.28

Medtronic

$ 4,183.37

ExxonMobil

$ 3,631.55

Vanguard Extended Market ETF

$ 3,121.45

GE

$ 3,081.62

Duke Energy

$ 2,821.82

Proctor & Gamble

$ 1,866.57

CMS

$ 877.22

Chevron

$ 874.44

Lowes

$ 800.97

Ebay

$ 621.15

Johnson& Johnson

$ 582.35

Edison International

$ 557.62

Pepco Energy

$ 502.92

Healthstream

$ 341.00

Bellsouth

$ 326.49

Palm

$ 148.70

Vanguard Emerging Market ETF

$ 55.10

Vangaurd Total Stock Index ETF

$ 50.87

Microsoft

$ 45.41


*Market value as of 11/9/2006

2006 has been a slow year on the taxable investment front. Most of my available cash went to a second property purchase and an engagement ring. However I did make investments in Medtronic, Ebay, Johnson & Johnson, Pfizer & sold a sizable portion of my IBM investment.

I'll detail my retirement accounts investments tomorrow.

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Comments (22)


IBM = $26,669.57
Microsoft =$45.41
Two tech companies at opposite ends of your investment spectrum. :) What's with that? You must really hate Microsoft or you don't see the gaint growing faster anymore.

Good point - actually thats not true - I made a $50 investment in Microsoft while I was earning the free money with a Sharebuilder promotion.

I just find it hard to value tech companies or at least find it hard to find them at good valuations.

I was one of the comments about IBM awhile ago, and I feel that it needs reiteration now. You are EXTREMELY undiversified in your holdings. Even if you didn't work for IBM, this would be a dangerous portfolio. Since you do, it's downright insane.

Almost your entire wellbeing is tied up in IBM. If they do well, presumably you'll get raises and bonuses, and your stock will go up. But if they do poorly... say someone you have no knowledge of is tweaking the books or racially discriminating in hiring... the company might struggle, you might be laid off, and your stock will go down.

This is what we in the investment business call a heavily correlated investment. It's poor money management. All your eggs are in one basket. You need to diversify.

I just think you have too many to review and keep track of? Thoughts on if you agree or not. Some overlap each other (JNJ Merck, PFE) (XOM and Chevron). Ever think abut consolidating them? And do you think you have too much in one stock (IBM). Or for the others, too little in each to keep around?

I don't know why people are harping so much on a "diversified" portfolio of stocks. In my oponion, you can diversify your risk throughout your entire set of investments - a purchase of a house, money in the bank, bonds, and stocks. Stocks, in some ways, being the most risky of the investment options you can make, why not treat it as such and use it as the part of your portfolio designed to have the most potential return by investing in a smaller set of winners. As such, I would say I like your portfolio though it might be a bit conservative. Why not consolidate some the money you put in smaller investments in big established blue chips (like JNJ, Pepsi, GE, etc) into a larger investment in maybe a smaller company with better growth prospects. Your portfolio's volatility wouldn't be affected too heavily given the weight of investments in giants like IBM, Pfizer and Merck, but might have more of an opportunity for higher returns (and less money spent on comission).

CB - first let me thank you for your comments. I appreciate you input. I recognize that diversification is important investment tool - it helps produce a more consistent return with reduced risk.

However, I'm not convinced you are correct by calling this poor money management. How many wealthy people became wealthy with diversifcation? My goal is to make good investments - if I become a good investor, then diversification is a bad idea. I am still learning and have many mistakes to make, but at this point I like to think that I am doing the right things to become a better investor.

Dan, I agree - this is definitely a blue-chip portfolio. You'll see I purchased some Vanguard Extended Market Index ETF and have a small cap index in my retirement funds (see post tomorrow), but I could expand my portfolio in that asset class - I would like closer to 25-30% of my entire portfolio in smaller businesses.

If you want a diversified portfolio, just put all your money in the S&P 500. Simple and done with; it's a no brainer. But I agree with 2 million. I also have a big chunck of stock in my company and it's the best investment decision I've ever made. If you have a strong conviction in a stock, you should have a big position. You make the big % returns with a concentrated portfolio.

Just out of curiosity, are some of your IBM stocks locked in due to the matching contributions?

My ESPP starts up this-month, and my matching contributions are locked-in for one-year before I can move them around.

NG

I agree with CB on this one. This hyper-diversification among 23 different issues seems ridiculous. 3 investments of less than $60? I subscribe to the school of thought that an individual investor should not invest a material amount of his net worth in individual stocks at all. If you did nothing but invest in the Vanguard ETFs, you would be set. You won't find a more tax efficient, low cost way of investing. 2mil, I respect your frugality and some of the things you advocate on this blog; for example the 0% balance transfers (which some might call aggressive); a couple months ago I had $32k, and I still haven't paid a penny of interest. However, when you ask "How many wealthy people became wealthy with diversifcation?" you scare the sh*t out of me. I would ask you, "How many people become wealthy by picking stocks?" I'm sure the wealthy diversifiers outnumber the wealthy stock pickers by a healthy margin. Your disregard for diversification sounds like a quote straight from Robert Kiyosaki (aka Mr. Fraud). Why is it that index funds beat 2/3 of actively managed portfolios year after year? If a team of money managers with access to tremendous amounts of information can't beat Mr. Market, how can you? In The Millionaire Next Door, it is reported that only a slight majority of people have actually created a significant portion of their wealth in the market; those millionaires that invest in the market only do so to house their wealth in a liquid investment that will hopefully outpace inflation. Most millionaires created their wealthy by owning businesses themselves. I'm not advocating that the masses go out and quit their jobs, just as I would never advocate that the masses start trying to pick stocks.

I think the point is being missed and your jumping the gun a bit. I understand and respect the power of diversification - I am certainly not suggesting that it isn't a good idea for most people.

However, I don't think it fair to suggest I am not diversified. If IBM went bankcrupt, it would impact my net worth - would I go broke? No. Isn't that diversification?

If I diverisfy to the point that am impact on a business I am invested in doesn't affect my net worth, then any extraordinary performance in a business isn't going to affect my net worth either.

Also don't forget - 2/3 of my equity investments are in my retirement accounts - I'll post these tomorrow - I think they will help with my "diversification" claim. Almost 2/3 of my total equity investments are in index funds.

Not diversified? It's only 78k of his net worth - and he's got at least 3 investments that are "significant" in terms of his networth. Besides - who want's to be diversified? You protect wealth through diversification, not build it.

I have more thoughts here... http://www.thealexblog.com/2006/11/09/other-people%e2%80%99s-money/

and here, if you're interested: http://www.thealexblog.com/2006/10/25/diversification-%e2%80%93-don%e2%80%99t-stretch-yourself-too-thin/

Thanks for the response. I was hasty; I didn't realize and/or forgot that so much of your retirement accounts are in mutual funds. However, I disagree with two items in your response:

1) I can't say that you are diversified with respect to IBM. For one think, you work for them. Also, their shares represent almost 10% of your total net worth, and almost 1/3 of your taxable account. That seems to be a concentration.

2) You say "If I diverisfy to the point that am (sic) impact on a business I am invested in doesn't affect my net worth, then any extraordinary performance in a business isn't going to affect my net worth either." To me, you're missing the point; what you quoted is exactly the point of diversification, not a negative aspect of it.

Anyway, thanks for sharing your opinions and posting responses, as well as the details of your taxable account. I'm looking forward to seeing your retirement accounts tomorrow.

Thanks for the comments - I loving discussing this stuff. I am not sure of the right answer. Its a constant battle for me. I think its important to be diversified to a certain extent - you don't want an "Enron" to crater your life's work.

I think if IBM went "Enron" (and I am not suggesting they will) it would suck! It would also put me 1-2 years behind where I am today and jobless.

Certainly setbacks - but I don't think it would destroy my balance sheet or my ability to meet my finanical goals. Given that I feel moderately comfortable with my exposure. Sure if the compay's market valuation gets excessive - you bet I am going to lighten the load in the portfolio.

You have a nice diversification. If you are buying and selling a lot how do you keep track of your tax liabilities?

I'm not against big positions, but I am against a big position in the company you work for. It's classic sentimentalism. Few people think the company they work for isn't doing well... everyone always thinks their company is undervalued. I used to work at a large investment bank, and I took advantage of the ESPP, and I thought the stock was undervalued. But I still took the advice of wiser people and sold my company stock whenever I could, because you can't objectively value a company that your livelihood depends on.

If you think you're a good investor - go out and find good companies to invest in. And if you want to make significant returns - invest in volatile micro caps. Investing in IBM is like owning the S&P - it's never going to move a lot to the upside in a short period, though company problems could knock it down a whole lot.

Apologies for pinging the trackback so many times... something freaked out on my wordpress. You don't need to approve this comment... I just didn't know how else to contact you and apologize

Dan - no worries - Movable Type filters some of them out so I didn't even pick up on it.

I think 2 million is doing fine. That SPA guy sounds very risk averse. OTOH I wouldn't advocate investing in your company's stock as an employee unless they are matching or something. Still IBM ain't going to disappear anytime so - they are showing remarkable ability to survive through different paradigms.

Do you show your dividend income broken out anywhere? Just curious what you annual income is from dividends, or if you are less concerned with dividends and more concerned with growth stocks.

For the large term I like the Medical stocks which make up the largest percentage of your porfolio. I calculated them to be around 38% give or take.

I know you work for IBM, but I think you should start selling some and buy another stock(s).

index funds would be best for you

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A personal finance weblog of my journey to reach my goal of $2 million + the value of my primary residence.
Current Net Worth: $1,574,185

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