merging inheritance into pp

[EM2]

Another newb question--hope this isn't becoming tedious.  I certainly appreciate the wise responses I've received so far.

Two years ago I inherited a bunch of dividend-paying stocks.  At the time, I thought that owning stocks for their dividends was such a good idea that I also opened an account at Sharebuilders and started dripping into it every month-- thinking I'd build an income stream for retirement (not far away).

Now, after working for a few weeks putting together my pp, the whole individual stock enterprise just seems like a huge pain in the  neck.  I can see why my parents did it--they started investing in the early 1950's-- but I'd much prefer to have this money distributed throughout a balanced portfolio.  In fact, having this amount of money in stocks unbalanced by other assets is now making me pretty nervous.

My inclination is just to dive in, sell them all, and put the money into individual 30 year bonds + 3ETFs that reflect the other asset classes.

My questions:  Is there something really good about owning these stocks that I'm overlooking?  Is there a better way to sell and redistribute the money--i.e. DCA out of the stocks and into the pp?  (Makes me shudder to think of keeping track of all that.)

Thanks so much for your thoughts.

[MediumTex]

One of the really good things about dividend paying stocks is that they tend to decline less than the rest of the market in a downdraft.

OTOH, they tend to rise less as well in a raging bull market.

There are plenty of strategies where dividend paying stocks make sense, but the permanent portfolio isn't one of them.

I might start off your permanent portfolio treating your dividend paying stocks as your stock piece and transition into a market index fund as your comfort levels grows with the strategy and you are able to make this move without bad tax consequences.

[AdamA]

Another newb question--hope this isn't becoming tedious. 

I like the newb questions.  I learn something every time I read the responses to them.

[EM2]

Thanks, Adam and MT.  Wish I'd asked the question sooner--I've already completely funded the 25% stock portion of my pp.  I asked it because of my reaction to what the market was doing this morning. I don't feel that anxious about anything in the permanent portfolio.  However, after MT's equanimous reply, I see the situation a little differently.  I'm now thinking about selling the small holdings over this year and next year to spread out the capital gains.  And I'll probably keep the few large holdings as part of the VP and let them accumulate for a while.  See how I feel.   

[KevinW]

Actually, do you really have capital gains that are big enough to worry about?  I thought that inherited shares received a basis step-up to their price at the time of inheritance*.  Depending on when exactly that happened 2-ish year ago, capital gains may be a non-issue.

(* I could be wrong -- I've never inherited anything.)

[EM2]

Thanks for asking, Kevin.  Made me think.  As I understand it, my cost basis is their value at the time I inherited them in 2009.  Total value has increased about 16% since that time.  Probably I should spread that gain over time or else just hang onto the big ones in the VP for a while.   

[MediumTex]

I wouldn't let a 16% capital gain cause me to do something I wouldn't otherwise want to do.

[KevinW]

I wouldn't let a 16% capital gain cause me to do something I wouldn't otherwise want to do.

I'm with Tex, the 15% tax on a 16% gain is 2.4% of the total portfolio.  I would just take the 2.4% hit and put the issue to rest.  As long as you hold the stocks you have to worry about where the stock market is going and whether Washington is going to change the capital gains rate or step-up rule.  While you might end up paying less tax or having more gains if you wait, the opposite could happen too.  My $.02.

[EM2]

As long as you hold the stocks you have to worry about where the stock market is going and whether Washington is going to change the capital gains rate or step-up rule.

Yeah, that's what was going on with me yesterday. The feeling is entirely different from how I feel about the pp holdings. 

[MediumTex]

The feeling is entirely different from how I feel about the pp holdings. 

This is one of the aspects of the permanent portfolio that probably doesn't get enough attention.

It's not just that the permanent portfolio works, but it also doesn't wreck your nerves in the process of working.

[Storm]

If it makes you feel safer about jumping into the PP, phase yourself in over the next 10 months, 10% at a time.  The net effect will be the same, but you also get the advantage of dollar cost averaging into the 4 asset classes (or the remaining 3 asset classes, as the case may be).

For example, first month you do a 25x4 split, but the next month, you dollar cost average into the assets to keep your perfect 25x4 split.  Maybe gold is up and bonds are down, so you put a little more into bonds and a little less into gold.

This has the advantage of getting you some great entry points into the asset classes over the next 10 months, as you will always be buying a little more of the lagging asset class - buying low is always nice.

Just an idea - you could jump in 100% and be happy as well, but this way you avoid a rebalancing event for at least a year or two.