Should we sell our stock? Clueless - please help!

[Macaela25]

DH works for Disney and has a percent of his pay got towards stock purchase each week. I have been trying to think of places to squeeze money from to continue to pay down CC's (we have made SO much progress - woohoo!), and I decided to check his stock balance. Neither of us have ever owned, sold, bought stock...we are a totally clueless pair. We didn't even know if we were going to have to go through a broker or something. Long story short, after a little over a year DH has gotten 19.5 shares of stock worth $669 at the moment, and he has invested $426. Not bad, if you ask me. So my question is....would it be a smart move to sell the stock and put the $669 (minus whatever fees) towards one of our credit cards?

Use small words please. I am a NASDAQ virgin.

[Hina]

General rule of thumb:
Before you invest in stocks check make sure you've paid off your high-interest debt. If you have $500 on a credit card charging 18% interest, paying it off is like getting an 18% return on your investment -- it's hard to get that kind of return on the stock market.

[Hina]

Check out the below article. Very well written and no diificult financial lingo

Article is called Tough choices by Erin Burt, courtesy of kilpinger.com

http://www.kiplinger.com/columns/sta...005/st0908.htm

[kurlisola]

Well, I won't get into the no-no (or at least proceed with caution) about investing $ in the company you work for. Since you have so little in those stocks its not really bad. The downside is, lets say you work for a company, making $80k a year & you have $50k in stocks with the same company. The economy turns bad, you lose your job AND your stocks fall in value as well. So, its kind of a double whammy.

However, specifically for your situation, I'd say not to cash out & continue to invest a small amount (either in the DRIP or an emergency fund) Why? Its good discipline to regularly put money into some sort of savings/investing vehicle. Plus, looks like he is investing less than $40 a month; so that is really not that much.

There are different philosophies about paying off credit card debt. Some say to pay off the highest interest rate credit first. The only problem with that is sometimes the highest rate is also the highest balance owing & it might take a year or so to pay that off. Whereas, if you has several smaller debts to pay off, then you get a type of euphoria and sense of accomplishment when you pay them off & gives you mental energy to tackle the higher balances. So, one method is logical-moneywise; the other might end up costing you a few more dollars (and I mean literally a few dollars), but the mental boost you get by seeing the bills paid off, helps you keep focused for the longrun.

You can apply this to savings vs paying off debt. Either you can forego savings & pay off your debt first. The downside to this is you have no emergency fund. Or you can pay off a little less debt, but also put some money away for emergencies. Both routes have their pros and cons.

So, I guess my advice is to make sure you have an emergency fund in place & then pay off bills. If you don't have an emergency fund, then stop the allotments to the DRIP account & instead put the $40 a month into an emergency fund (and keep your fingers crossed that you can save up enough before you have a vehicle break down or frig go kaputt). If you already have an emergency fund, then you can even add more to the fund or apply towards bills or keep putting it into the DRIP account. But I wouldn't really close out the DRIP to pay bills that you are apparently already successfully paying off. I would only close out that account if it were losing money & future predictions were not very good; or if you run into some severe financial problems.

By the way, the rate of return on that seems really high. You might want to double check how much he has invested & the balance. What is that increase? At least 40% in a year? Thats a bit unusual.

[Macaela25]

By the way, the rate of return on that seems really high. You might want to double check how much he has invested & the balance. What is that increase? At least 40% in a year? Thats a bit unusual.

Taken from the Shareholders newsletter -
November 28, 2006 -- The Walt Disney Company board Tuesday declared an annual cash dividend of $0.31 per share, a 14.8% increase from last year’s dividend, payable on January 12, 2007 to shareholders of record at the close of business December 15, 2006.

The January dividend payment represents the 51st consecutive year of dividend payments to shareholders.

“I’m delighted to report that 2006 was another great year for Disney by almost every measure. We delivered 34% growth in earnings per share, record revenue and record net income,” said Bob Iger, president and CEO of the Walt Disney Company. “We also generated over $6 billion in operating cash flow – another record. That cash flow allows us to invest in initiatives to drive growth, maintain a strong balance sheet and return value to investors through share repurchases and dividends.”

Apparently they've had a good year.

ETA: The increase should actually be based on 16 months, not 12. I calculated his total paid in, not just what was paid in 2006.

[kurlisola]

Guess I should have went with the Disney stock I was looking at last year-lol! Congratulations:-)

[FantasyIsland]

Before you consider selling this stock, you MUST figure out whether the money to purchase the stock is before tax or after tax. If before tax, then it is a 401K deduction and you will be socked with some very serious tax consequences if you sell the stock and use it for anything other than a 401K-type roll-over (other kind of savings - mutual fund, restricted savings account). However, given the high rate of return in this particular stock, I think it would be quite foolish to sell the stock which is earning you nearly DOUBLE the interest that your cc is costing you.

Fan

[MaryMary]

The amounts in OP message doesn't calculated well, unless the company put some money in for him as part of the benefit plan. If he started within 1 year his basis (average cost per share) has to be more then the lowest point of 52 week range, $23.77. Because the company was buying shares for employees a little bit at the time, so the basis has to be much higher then $23.77. But $426/19.5 shares = $21.85. Check the condition of this investment. if the company invested any money on your DH behalf this amount will be taxed as earnings when you sell, plus capital gain tax on all gains IF they'd allow withdrawal at any time, plus any penalties/fees, etc. If these investments are part of his pension plan you'll be hit with steep penalties, 20% and more, on the top.

$ 0.31 per share x 19.5 shares =$6.05, minus any applicable distribution fees, this will be your dividents, the rest is short term capital gains.

Do not sell. Look for another ways to reduce your credit card debt.

BTW, DIS traded on NYSE (New York Stock Exchange), not NASDAQ. :)

[Kristen.C]

OP one thing you may want to consider is seeing if your CC company offers any options for consolitating your debt. The company I used to work for (Citi) offered unsecured personal loans that you could get for a fixed rate or a variable rate. Many times the rates on the personal loans are MUCH lower than the credit card rates, and sometimes only slightly lower. If you do consider doing it they can even calculate your estimated monthly payment. If you're approved you can then use the money to pay off all of the credit cards and then you'd have the lower rate with one payment every month. Just make sure it's an amount you could afford to pay every month. Since it's unsecured, you don't need collateral like a home or a car, and because it is a personal loan, you can use it for whatever you want. It's a good option and one you may consider looking into if you qualify and are approved.

Just a suggestion so that you can look into all of your available options. I am clueless about stock so I can't even begin to tell you what to do with that!

Good Luck!

[berlinsmommy]

Also, OP, are you buying the stock at market prices or at a "strike price"? I don't know how well I can explain this (I'm a novice when it comes to stock), but market price is whatever the stock is currently trading for, so if its $20/share and you regularly contribute $60/paycheck, you'd get 3 shares. If the next paycheck its trading at $30/share, you would be getting 2 shares with your $60 (a pretty simplified example, but I think you get the gist). A strike price is a preset price offered to employees in a limited quantity. However, the strike price can change, but you would be notified. For example, if the strike price is $25/share, that is your price regardless of the market.

If you get a strike price, you need to watch the market closely. Many people assume that a strike price is always lower than the market price, and therefore a good deal. This is not always the case. My brother works for ebay and a while back when their stock spilt, immediately after the split, the individual share price on the market was lower than the strike price offered to employees. Does that make sense????