Nvidia given by relative. Keep for now or sell?
By - DrTwoWheels
I would immediately sell out and invest in what you really believe in. If you were given 35k cash today, would you buy the Nvidia shares? Sunk cost analysis can be helpful. You’ve been really fortunate with some single stocks, so congrats! I would want to lock in those gains.
The only downside I can think of would be taxes, so you’d want to look into what kind of capital gains you’d have to pay, etc.
Edit: I see now that you said you have no income. Even better news on the tax front, and I would be eager to put that 35k toward buying the haystack. As Nvidia is currently 11 in the S&P 500, you’ll still own quite a bit of it!
Actually while you have lower income (as a student), capital gains is 0%. And it looks like the cost basis and holding period of gifted stock are determined off of the person gifting the shares, not you receiving them, so find out how long they’ve held the shares to ensure your tax will be 0% (long term capital gains).
That 0% LTCG may change going forward so there’s something to be said for locking in the stepped up cost basis now.
You may still owe some state taxes but that’s minor and would be owed eventually anyway.
Thanks, that’s helpful!
This is a very useful type of thing to think about and question to ask. I agree with everything said, but just for research would recommend OP look into the the Endowment Effect. I think it more perfectly explains what OP is feeling and what is affecting their thinking.
Above comment is definitely the rational thing to do.
I want to add that OP should also consider the following biases they might be experiencing:
In many situations, I value happiness over maximizing my portfolio. I therefore have made "suboptimal" decisions to accommodate these biases and as long as the risks/consequences have been considered, I see no harm in fully informed emotional decision making :)
This is why I've started a program of selling off a little bit of my index funds when they hit a new high, so I have some cash to buy funds when they drop. We will see whether I can actually do better than just holding this way, but I realized I feel better about downturns when I can visualize them as buying opportunities, but if I have no extra cash then that's hard to do. (Doing this only in the retirement accounts so taxes aren't an issue)
I can’t think of a much better response than this
Nvidia has practically skyrocketed since I posted this lol
> I would immediately sell out and invest in what you really believe in.
Ha, this post did not age well... long NVDA :)
No income so no capitol gains tax? Sell and diversify immediately. If you like e-trade you can stay, just use the ETF versions of VTSAX and VTIAX, VTI and VXUS.
Or just VT to get VTWAX and let the US and ex-US auto-balance
That is also an option assuming you want to hold global market weight.
Is capital gains based on current income bracket? If I’m 30 and decide to no longer work for a while, does my taxable brokerage account no longer incur capital gains?
To be clear, there are *capital gains*, and there are *taxes on* those capital gains when you sell.
Don't be confused by your brokerage account always showing you the capital gains (unrealized; what they would be if you sold right now).
Whether you *pay tax* on the gains depends on your income bracket in the year that you sell something.
Gotcha, thank you for the clarification
up to 40K of total taxable income (wage, dividend, interest, realized gains...)
No capitol gains tax for 4 more years though
IMO, do it anyway. NVDA is a very expensive stock, the likely hood of it underperforming the broad market is significant. Further, as time progresses be sure to tax gain harvest any gains every year.
"Tax gaon harvest any gains every year"
What does this mean exactly, sorry, would you please elaborate?
It’s a good thing I didn’t
If you are going to base your decision over 6 days of movement you are missing the point of the Boglehead mentality.
Unpopular opinion alert:
I've read thru the Bogleheads wiki and now VTWAX (VT is ETF equivalent) is one of my biggest positions. Love the philosophy.
In regards to your NVDA shares, I would sell 75-85% of the value and begin diversifying into your standard choices: VTWAX (VT) or VTSAX (VTI) + VTIAX (VXUS).
I would actually let the remaining 15-25% just sit for at least 6 months after the ex date of the 4:1 split (7/20) and reassess at that time.
There is no equity added or eliminated due to splits but for forward splits of big names like TSLA, AAPL (both had splits in 2020) and now NVDA, it's a good bet (gamble) that retail investors, especially options traders (I don't trade options) will have more buying power, especially since options contracts deal in 100 shares per contract.
As I'm sure you know, on ex date 7/20, NVDA will have 4x more outstanding shares but will drop to 1/4 of its current price.
Post split, more buyers will be able to afford more shares and NVDA is a very heavily traded and popular stock with solid fundamentals.
TLDR: Sell 75-85% now and let the rest ride for at least 6 months after 7/20. Reassess at that time. It's a gamble to believe NVDA keeps going up post split, but one that leans in your favor if you look at big names that had forward splits in 2020 (like TSLA and AAPL). Multiply current TSLA price by 5 and current AAPL price by 4 to see pre-split prices.
Source: Mainly a Boglehead but I do gamble with about 10% of my total portfolio.
This is my favorite answer by far. Thanks a lot for taking the time. I will probably sell 75% closer to the stock split in July. Then by the end of the year I’ll have everything in vanguard funds.
Another perk of this route is that you still keep the spirit of your relative's gift alive. When they say "How's that NVIDIA stock doing?" you can honestly answer them instead of saying "Oh I sold it all back in 2021"
This is good advice. I am new to this sub, and don't comment, because I need to learn to be a Boglehead, but I would definitely keep a few shares for the 4:1 split. Use the rest to buy VT.
Couple things to consider:
1) as a student with little to no income you’ll probably have zero capital gains which is a good case to sell now (or at least the calendar year before you start working full time and pass pass the 40k threshold and move into the 15% capital gains tax bucket.) this is probably your single biggest decider.
2) Nvidia is about to do a 4-1 stock split which is typically a good thing and should be seen as more growth coming (NVDA has 4 spilts since 2000). Share holders of record on June 21 will receive an additional three shares of stock very every share held to be distributed on 19 July and newly split shares to be traded 20 July. This is a good case to hold this stock. Disclaimer: I keep about 3% of my total portfolio for playing the stock market, have NVDA shares, will pick up more as I think NVDA has a lot of potential to keep growing.
3) personally I like E*TRADE as a platform better. Better able to pull research about individual stocks. But if your main goal is to VTSAX/VTIAX, Vanguard is easier to exchange between their own funds for rebalancing purposes (or shift to the ETF equivalents of the mutual funds). So I would vote for Vanguard based on what you said
I’ll be a student for 4 years so it’s not a huge rush
For single filers the income limit for paying no cap-gains tax is ~40k. So if I were you I would absolutely swap it for a diversified funds (maybe dump some of it into tax-advantaged accounts if possible while you're at it) before you get a job. If you aren't working at all this year then this is the perfect time for it.
What kind of tax-advantaged accounts would be possible if you aren't working?
EDIT - *see below* thanks for the correction.
Capital gains are included in your modified adjusted gross income so if you sell the full amount of 35k and have a MAGI of 30k you can contribute this year to your 6k limit on a Roth or traditional IRA.
I believe... someone cross-check this for me.
That's not right, unfortunately. Your MAGI is only relevant to the income-based upper limits on IRA contributions. In order to be eligible to contribute at all, you need "earned income" at least equal to the amount you're contributing. And capital gains are not "earned income."
A 529. Guess it could be used until OP graduates or the beneficiary changed after OP has kids.
If you sell the stocks, you will be responsible for the capital gains taxes based on their cost basis.
Even still, I'd probably sell, pay the taxes you calculate you will owe to the IRS immediately then reinvest the remainder into whatever investment you are comfortable owning long term.
E-Trade versus vanguard is going to be a personal decision. E-Trade is fine so I'd probably just continue with them myself.
Considering u/DrTwoWheels doesn't have any income right now, they may be exempt from federal capital gains taxes if they sell now.
Otherwise, I agree with the above.
Yeah now is probably the best time to sell as you get ~$40k in capital gains at the 0% bracket if you don't have any income
I hope you have not sold them. Nvidia is a gold mine since they have become the clear winner of the GPU wars of the 2020s. That is a stock you keep until you retire since you already have so many shares at that value. Also cost sunk fallacy does not mean what the above poster said at least not to your situation. If those shares were at a loss that would be relevant but it's the opposite. I would kill for what you were freely given.
I agree. I bought Nvidia back in 2015 before my Boglehead days. I’ve never sold it and don’t plan to. Now all my new contributions go to VTI/VXUS, but I’m holding onto NVDA. My holding is in a taxable account so I have that to consider.
However, if the OP can get around paying capital gains, then I can certainly agree with selling a portion of it.
I have not lol…yet
But I probably will sell most by the end of July to ease my mind
If it were me, I would transfer the shares to Vanguard, sell, and buy mutual funds. Let that ride for a few decades and its a nice start on a retirement portfolio.
Honestly I say fuck it, keep the shares and have fun. You have your whole life to contribute to index funds for retirement. You invested nothing for these shares, so let it ride and invest any future income/savings into the index funds this sub preaches
Plus it’s a good company :)
I would start with selling a portion of it at least. Maybe half?
I thought about saying this. Not as a recommendation per se, but as a plausible option at least. OP is young enough, and stock splits *technically* don't change anything, but that doesn't mean people don't react to the news anyways. I always find when considering 2 all-or-nothing ideas which are equally valid, sometimes, but not always, the best option is a blend of the 2.
In this case the OP asks should they hold all or sell all. Maybe keep half and see if it gains 10%. NVIDIA is about as solidly placed as a company can be right now so there's not as much downside as other options. There's downside, but IMO its minimal in this case.
Transferring half into mutual funds and holding the other half of the NVDA shares until a week or so after the split is something to possibly consider. That in no way at all implies that is what the OP should do. It is merely what I would consider as a valid 3rd option were I in the OP's shoes.
I follow your logic, and it doesn't sound bad, but when I frame it differently it doesn't hold up for me.
If it was a great idea to hold Nvidia we should all sell (half?) our VTSAX, pick up Nvidia for a few weeks, then switch back to VTSAX. But nobody here would recommend that, right?
The difference in your examples is tax implications. Selling a mutual would expose (depending on account type) an asset to taxes it wouldn't normally be exposed to yet ( again depending on the account type). In the OP's case the money is going to be taxed anyways when he/she makes the switch.
I definitely see your point, its just if the taxes are going to happen anyways, you might as well see if some of it makes a decent amount. Who knows it could even offset the tax burden.
Again it isn't my recommendation. Its merely an option that my brain considered upon the OP explaining their situation. It could be a terrible idea. Trust me I've had my fair share of those and then some.
I thought it was an interesting discussion anyway. I still think if we altered my position to say "IRA accounts" instead of all accounts, so that tax implications were avoided, most would agree it's a terrible idea.
More than likely it is. I'm a single retail investor who only learned last year i have about a negative 10% chance of beating the market myself lol.
Idk man Nvidia is a great company is hate to let those prices go. Graphics cards and everything are becoming increasingly important. I would definitely sell some but I wouldn't let it all go.
VTWAX and chill my man
If you can't DCA psychology is a big factor here. It's easy to forget the account exists and go about your business. If you switch to VTI now it's "your" decision and because of that it's hard to walk away. You'll feel bad when the market goes down. You might even be tempted to sell during the next [real] dip when it loses 10-15%.
The best performing funds are held by dead people. Hold off until you can DCA. Forget the account exists in the mean time.
However, the second you get an income source, you can put your income into an IRA/Roth IRA (and possibly 401k). At this point it's a good idea to max those out, and if you need the difference, sell the NVDA shares slowly and live off of it. This will funnel your money slowly into retirement accounts that is totally worth it.
If you don't want to keep it, I would sell the day before the split. They seem to peak there and then come back to reality the day of the split or the day after. I personally own a ton of Nvidia beside my indexes and I'm confident in the stock.
One consideration that I havent seen mentioned is financial aid. Will the increased MAGI be reportable on your FAFSA and will that reduce your aid package going form zero income to $30-40k? If so maybe wait until last year of school after final FAFSA or spread it out over several years. I would certainly diversify out of single stock into index funds as soon as possible.
Interesting. I’ll have to look into that. Thanks!
Keep.. in the long run it should grow at or better than market
LET IT RIDE.
Especially through the stock split.
NVIDIA has a lot of upside given the shortages of electronics.
Give it a few more months and see there is no rush.
I’m going to get downvoted but right now is a good time to hold NVIDIA. The stock split is great, theres a silicon shortage and demand has skyrocketed. If you do sell you should keep 10% in it. I’m 98% index funds but I’ve been riding my 2% Apple for a long time. Nvidia is a great one at the moment.
Keep. It's a good company
I would keep it. I
If you do decide to sell, at least until after the stock split. People are FOMOing into it now.
as a boglehead, if you have owned it for more than a year, definitely sell and go into indexes. as a buy and hold investor, I think NVIDIA has potential to be handed down to the next generation. As a gambler, NVIDIA has been on quite a run no harm in taking profits put some aside for taxes.
Not a popular opinion here, but I would NOT sell. In fact I just purchased another $35k of NVDA a few weeks ago for my retirement account and I'm likely double your age.
Nvidia is like owning Microsoft in the mid 90's. There is sooooo much room for upside given that practically everything will be chip driven over the next few decades. Nvidia has a part in almost all tech that is growing rapidly. Gaming, crypto, cars, AI, computers, etc.
As others have mentioned, it will also split 4 for 1 on June 21st. If you desperately needed the money then I might suggest otherwise but you are so young, just let it work for you. Trust me, you would regret the decision to sell in 20-30 yrs. All future money you invest you can put it into mutual funds or VTSAX or whatever. But I would let this ride.
And E*trade is great. I opened my first brokerage account with them in 2001.
Agreed. Nvidia is firing on all cylinders and their data center business just started to kick into high gear. Auto business may start to contribute more significantly in coming years. AI, gaming, and workstation businesses are doing well. I bought more and plan to hold until the Nvidia story changes. I still think NVDA is way under valued at $700.
While I’m not a true Boglehead (hold some individual stocks, though all my mutual funds and ETFs are index and make up 50-70% of my portfolio), I’m 100% in agreement. If I was OP I would absolutely hold the shares for the long term. I wish I’d picked up some shares over the last month or two when I just didn’t hit the buy button.
Hold on NVIDIA. It’s going to grow much more than any index fund will.
Maybe, maybe not. Suggesting a portfolio of a single stock will not be popular in a sub whose identity-defining philosophy is owning the entire market via passive index funds...
Maybe. Kodak was the king of photography from time immemorial, but they squandered advantage after advantage to crawl into unprofitability in the late 1990s and bankruptcy a decade later. Will another chipmaker do the same to Nvidia?
That’s apples to oranges though. What will or can replace the graphics card? The smart investors were early to catch on that phones were going to have good cameras by the early 2000s. Even before.
What can effectively kill NVIDIA? The only real threat is competition but I don’t see anything that could effectively run them out of the market.
A component shortage in their feedstock. A foundry disaster. A major crypto crash. New international tariffs. I'm sure there are material risks for all companies.
If it was such a sure thing, wouldn't the market have already priced that in?
All of that sounds like temporary issues that can be overlooked or not large enough to destroy them. Kodak got straight up wiped out by the smartphone much like video stores got wiped out by online streaming.
They don't seem to grasp the difference between market shocks and fundamentals of an industry.
NVDA went down **50%** between September and December 2018 because of trade war concerns, lower demand, and the crypto bubble burst. Obviously it has gone back up (frankly the whole market has), but NVDA is by no means untouchable.
You can't tell me with a straight face if BTC goes back down to $3K that Nvidia will not be impacted.
Wow, You mean there are short term price shocks due to market forces, though that doesn't change the fundamentals of the company or it's moat?
Imagine if you would have sold it all 1 year ago when you were probably up 3 - 4 times your money, it would not have been a dumb thing to do. But also you would probably have about half as much money as you do now. Do what brings you peace of mind, Personally with those type of gains I would set some goals and for something that still has good potential like NVIDIA I would just average out say 200 - 300 bucks a week into other stocks you like until you feel comfortable.
Sell the shares immediately. As you are making no income, you will not have to pay any taxes on it. You can then put it into whatever you want (index funds), but you should take advantage of this opportunity while you are still a student to not need to pay tax on the 30k gain.
I’ll actually be a student for 4 more years
There's no guarantee the tax law will not change over the next few years. There is no reason not to sell now. You could always buy back into NVDA if you want to with that money down the line.
I think that the reason is the upcoming split
Do you think computers and GPUs aren't going to be needed in the next...forever?
If the answer is yes, then hold on on to gifted shares. It's a solid company with solid market share. It's not like we're going less digital.
If the answer is no, then, sure?
Nvidia dominates their field, I’d keep.
Nvidia is here to stay and its growth is proof that proper individual stocks investing is much much better than the slow index fund approach
I would keep it and watch it double in 5 years
NVDA is about to split 4:1 I believe....have you looked into selling covered calls on the shares?
Personally you're still young and stocks are meant to be a long term game. Due to that (amongst other reasons), I'd take the risk and hold.
you could try selling in when they release some shiny new videocard and the price goes up? if that's even a thing
Thinking my strategy will be to slowly pull out of it once the split happens
honestly as long as you are not losing much anything should be okay. nvidia seem to be doing fine nowadays, so i doubt you need to rush anything, but still be careful
Sell and buy VTI+VXUS or VT
Hold it man! At least until after the stock split!
Why do you make this recommendation?
There is often a rise in price after the announcement of a split, due to psychological reasons, but I haven't seen any significant price trends around splits themselves, except maybe a slight downward selling pressure from people that don't understand the mechanics of splits. Splits have zero effect on the value of stock held other than some people's emotional response to the announcement.
I suppose you’re right - there wouldn’t really be any value in just the stock split itself. I just think Nvda is a good company and has a lot more room for growth.
Congrats on the good fortune. Did the relative who gifted the shares have any insight or advice to go along with them? What would they want you to do? Can you talk to them about it? Obviously they are yours so you can do whatever you want, but I would want to respect the spirit of the gift. Similar to if I were gifted a rental property or a piece of fine art; I wouldn’t have bought it myself, but I wouldn’t necessarily just swap it out for VT either, now that it was given me.
I would consider cashing some out for an emergency fund if you don’t have one. Then maybe cashing out some for VT. Personally I would probably end up keeping at least one quarter of the shares in Nvidia and just pump money in indexes once you start working. But of course the Bogle way would be to index now.
Try not to stress it. It’s a pretty good problem to have.
A question in regards to /u/DrTwoWheels as a full-time student. If OP sells stocks with less than $40k income and falls under 0% capital gains tax bracket, will it affect his financial aid?
I would sell immediately and spend 50% of the money on shares in an S&P 500 ETF and 50% on shares in a US total market ETF. Make sure you find ETF's with very low management fees, I'm in Canada so I don't know what specifics ETF's. Vanguard is usually one of the cheapest options.
The reason why I advise you put all of this money in S&P 500 and/or total US market etf is because you are very young and say you don't need the money. If you want to use this as a retirement fund I think this is a good strategy. If you're planning on using this money for graduate school or to buy a house in 5-10 years, I would implement a much more conservative investment strategy.
Also, I have no idea what the tax implications are of you selling these shares, I'm not familiar with US tax laws. Please seek tax advice from a financial representative at a respected bank, this should be free. Just tell them that you are looking at selling your stock and moving it to one of their mutual funds and they should walk you through the tax issue.
DO NOT BUY MUTUAL FUNDS.
Why would he want to do 50/50 in VOO and VTI? There’s a roughly 80% overlap between the 2, so he should really just go with one or the other in part because there’s no real need to hold both when there’s so much overlap and in part because the two have very similar long term performance.