Friday, March 23, 2007

I'm reading the newspaper comics to Daisy the other morning and one of the comics referenced inflation, a concept I assume Daisy is not familiar with. Because she requires my wisdom, I take the time to explain it to her.

Me: You see, prices generally go up over time. Stuff gets more expensive as the years go by.
Daisy: Not for you.
Me: What? Not for me? Yes for me. Why would you think this doesn't apply to me?
Daisy: Not with that stock you own.

Zing! Daisy was, of course, referring to the stock from the company I work for, that comprises the vast majority of my portfolio. It's current price is about 2% of its high. If Daisy has learned one thing from her old man, it's not to listen to his stock market advice.


tinyhands said...

With a little planning, you could liquidate that stock (at least partially) and use the capital losses to offset income. It's an efficient tax-strategy and frees up that money to invest in something that is more likely to increase in value. Consider the opportunity cost of leaving it alone.</seriousness>

Mike said...

Unfortunately, almost none of the stock consists of shares that actually purchased for real money. It was all either given to me at near zero-cost or is a set of options that are unexercised. Very little of it can actually be considered a capital loss.

Besides, I'm sure it'll zoom back up any day now!

tinyhands said...

IRS Pub 525 indicates that statutory/incentive stock options are generally treated as capital income/losses and are reported on Schedule D. If there is a gain, you may have ordinary income in addition to capital gains, but losses are strictly capital losses. For gains, there are also holding period considerations.

So, it might still be in your best interest to exercise.

Mike said...

Zoom, I tell you.