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Thread: Sunk Costs

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    Default Sunk Costs

    I have a sunk cost of a dying stock, unless war breaks through, or it sells out it will go bankrupt by early May. Its at a loss of 6 months of my life right now but if it crashes Ill lose 1 yr of my working life.

    I think theres a small chance of recovery.

    1. Sell stock now - get back 4k. (take a hit of 7k)
    2. Sell half the stock and pray for recovery.
    3. Wait on hope. (either sell out or recovery)

    Its such an ugly thing.

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    God/dess LAChloe's Avatar
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    Default Re: Sunk Costs

    Maybe ask this question over in Dollar Den...there are a lot of people who post in that area that could offer you advice.

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    Default Re: Sunk Costs

    You have to look at a stock based upon its current prospects. If you truly believe that the company is headed for bankruptcy then IMHO you should salvage what you can, because bankruptcy usually wipes out equity value. As hard as it is, you cannot consider what you've already lost in the equation - that's like a gambler continuing to throw good money after bad to recover what he/she already lost at the craps table.

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    Default Re: Sunk Costs

    RD is right. It might be a good idea to reconsider putting a year's worth earnings into one stock (if its going to be a big financial hit).
    Last edited by North; 12-29-2015 at 05:28 AM.

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    Default Re: Sunk Costs

    Quote Originally Posted by North View Post
    RD is right. It might be a good idea to reconsider putting a year's worth earnings into one stock (if its going to big financial hit).
    Well I wasnt expecting it... But I better learn lessons of life now than later.

    But at the time it was rising. I didnt really look at the big picture. It was rising because it fell so low.
    Last edited by QueenBoleyn; 12-28-2015 at 10:10 PM.

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    Default Re: Sunk Costs

    You might be interested in Peer-to-Peer lending, it’s been popular among certain investors.

    Here is a good write-up from a site focused on doctors and their investments:

    http://whitecoatinvestor.com/4-years...-correlations/

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    Default Re: Sunk Costs

    Talk to a tax adviser / CPA to see if the write off this year will offset income and save you on taxes.
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    Default Re: Sunk Costs

    I bounced this thread to Dollar Den to give you the best shot at plenty of answers. Good luck!
    “What a caterpillar calls the end of the world we call a butterfly.” - ECKHART TOLLE

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    Default Re: Sunk Costs

    I suggest selling, but I would wait until after Jan. 1, unless you have any capital gains you can offset your losses with. If you don't have any capital gains this year, then wait until after Jan. 1 to sell it, and hopefully next year you will have some capital gains you can use your losses to offset, so you can save some money on taxes. Unless you think that this stock is the best investment there is, you're better off selling it and moving your money to a better investment. Just because you lose money with one investment doesn't mean you can't make it back with another.

    If you're not very knowledgeable with stocks, I suggest investing in mutual funds instead. This way you'll be more diversified. Investing a lot of money into a single stock can be risky.

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    Default Re: Sunk Costs

    Quote Originally Posted by eagle2 View Post
    I suggest selling, but I would wait until after Jan. 1, unless you have any capital gains you can offset your losses with. If you don't have any capital gains this year, then wait until after Jan. 1 to sell it, and hopefully next year you will have some capital gains you can use your losses to offset, so you can save some money on taxes.
    This is not really accurate. If she has no capital gains to offset against, then up to $3,000 in losses can be deducted against ordinary income for 2015 and any additional losses can be carried forward and applied to future tax returns (called the Capital Loss Carryover provision). So if she doesn't like the stock anymore, she would be better off selling it as soon as possible.

    In fact, many stocks bounce up at year end, due to conventions in the investment management industry about not driving prices down at year end valuation dates, and then dip in January when selling resumes. So waiting until then could hurt her even more.

    Queen, of course we are not tax or investment professionals, so please consult your tax pro to confirm (though I am fairly confident on this one, lol).

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    Default Re: Sunk Costs

    QB; I'm in complete agreement with Rick above. If you believe in your heart of hearts that company will likely declare bankruptcy in a few months, then sell. It's about what makes you sleep well at night.

    One issue not mentioned (though in any case should not be the "tail that wags the dog") is whether you've held stock less than 1 year. I'm guessing by your statement "6 months of my life" that you've owned stock for 6 months. If true, that would be a short term capital loss. Since short term gains would be taxed at your marginal rate you could (assuming no capital gains) deduct $3000 in losses, and carry over the remaining $4000 in losses next 2 returns. It is patently silly to put off the loss deduction benefit for another year.

    If you've held stock for over a year, capital gains tax would be 15% for most tax brackets. So, a probable (I'm just guessing) 28% tax break vs 15% makes for a stronger case for selling a bad thing sooner rather than later, from a tax standpoint.

    Like Rick, I'm not a qualified tax advisor. I'd suggest consulting with your stockbroker, and/or a tax advisor prior to taking any action. HTH...........
    I'm right 96% of the time. I don't sweat the other 5% .......................

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    Default Re: Sunk Costs

    Remember, there is no tax on the sale if you sell it at a loss. RD is correct, you can take up to $3,000 in tax loss this year if there are no off setting gains. If you have a stock in your portfolio that has some built up gains, now might be a time to sell it and your loser. Off set the gains with the losses and you have cash to invest in something better. As RD and E2 say, I am not a stock broker and this is not tax advice. Simply information.

    HTH
    Z

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