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Old 02-26-2004, 02:59 AM
adios adios is offline
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Join Date: Sep 2002
Posts: 2,298
Default Re: I have to sell some stock...

Don't know what your tax situation is. I'd sell everyone of em, take out the money you need and take the money that's left and buy SPY. Several reasons for this:

1. Diversificaiton is better i.e. you're taking no specific company risk on by buying SPY.

2. You'll maximize the reward for the amount of risk your taking. It's easily proved mathematically in portfolio theory that company specific risk can be diversified away and that investors are not paid a risk premium on specific company risk.

Just for fun I went through and looked at the betas for each company according to Yahoo. Assuming you have an equal amount of each stock dollar wise, your average beta is .8068. Assuming your holding period is 10 years and your beta reflects your expected return your most effecient portfolio would be 80.68% of your money is SPY with the remainder, 19.32%, in a 10 year Treasury yielding today I believe 4.01%. An effecient portfolio is where you maximize your return for the amount of risk taken. I realize that buying a 10 year Treasury is probably impractical but you get the idea. You may be able to substitute a fund for the treasury that provides the equivilant return and risk or close to it as I don't know about that. By combining the riskless asset with the risky asset in this way provides the most effecient way to acheive your desired return i.e. effecient according to portfolio theory. If the preceding is unappealing do what Ray said because IMO he's right.
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