General Electric Retirees Consider selling GE Stock
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Many General Electric (GE) retirees rely on The company's pension and stock for the portfolio. This works well when the company is healthy and the shares perform, but the flip side is not pretty. Judging from the response to General Electric Retirees takes another turn many hold a large stake in GE stock , which is down 75% in the last two years, but will not sell anything out of loyalty to the company. If you are in this camp, your best odds are a good outcome.
Loyalty  GE retirees have long been envious of others of their generation f or 3 reasons.
First, your life work made GE an iconic American success story. Who would not be proud of it?
Secondly, many GE employees had been awarded enough GE shares over their career to be prosperous. Many never sold a single share of the GE stock and lived comfortably on the dividends.
Third, GE's pension scheme is a defined benefit plan that generates generous payments no matter how the stock market performs. Just about everyone else has a defined contribution plan, where the benefits ultimately depend on how well the selected investments are.
In addition, GE has previously made voluntary special one-time payouts. For GE pensioners, these payments are like getting a 13-month pension payment that year instead of the normal 12. Between 1980 and 2011, GE did not do this once, but 9 times .
General Electric gave you meaningful work that created a company you are proud of and you have enough stock along the way to be able to retire with a portfolio that paid a decent dividend and a pension that paid good benefits that the company often volunteered over . GE has had your back for decades and now you want to go back. I understand your loyalty from.
In short, General Electric is in trouble. Therefore, the stock has fallen 75% over the last 2 years, so the company has cut its quarterly dividend from 24 cents in 2017 to a token 1 cents and why the pension fund is underfunded by $ 31 billion .
What can you do?
The most important decision you can control is how much GE share you hold?
The under funded pension fund may worry, but there's nothing you can do about it. In the worst case, the Pension Fund (PBGC), a public agency, will take over GE's pension obligations. Check out this page to see what your maximum benefit may be if the PBGC enters.
The main reason for selling GE storage is that if the company does not turn things around, you are not able to get your pension benefits reduced at the same time when the portfolio your take as big a success as you can not recover from it.
I have suggested that a number of GE retirees sell the GE share and I have heard two common reactions. Here's one:
Similar arguments were made about Apple when the inventory crashed into single digit. Then it rose from the ashes as a phoenix and became the valuable company ever, and eventually became the first company to be valued at $ 1 trillion.
Think about the advice about selling Apple stocks was taken when it sold well below $ 10 per share. That the seller would be mightily disappointed. It's easy to sell when things are gloomy; Fortunes, however, are made when you can see today and see tomorrow's opportunities.
Here's my answer:
If you think GE is like Apple 10 years ago, it makes a reasonable amount of effort in a diversified portfolio – 5% maybe 10%.
The other common reaction is what I call the "thought experiment". Here it is:
If GE should cash all other assets apart from Healthcare and Aviation, they would be worth around 19-20 dollars per share. The conglomerate is unhealthy, but with very valuable parts. GE is not a $ 9 share in a rational world.
Your thought experiment may be more reasonable than the Flannery plan presented earlier this year. But this is not GE's plan. Warren Buffett can make them adopt this plan, but we do not want to. If you believe in this analysis, it makes a reasonable size effort in a diversified portfolio – 5% maybe 10%.
I've heard many creative variations of these reasons not to sell any GE shares even if it's the only share in their portfolio.
A Better Question
The most common answers were as if the key question is whether GE is underestimated. A better question is how much of the portfolio you should have in GE?
Even the best investors only earn about 66% of the shares they buy. They are careful to handle the size of their positions, so the losers are more than made by the winners.
Nobody should bet so much that GE can never get out if they are wrong. This is double for those who rely on GE's retirement plan.
If GE already exceeds 10% of your portfolio, you sell something reasonable even if you think the company is underestimated and has the potential to be the next Apple. 19659005] Maintaining a 10% position in GE is a huge trust ratio in the company that you can do more comfortably if the rest of your portfolio is in other shares.
Just about all I have corresponded with have agreed with me to this point. But I have not yet heard that someone actually sold some GE shares.
I think that's because GE is much more than 10% of their portfolios, and sells enough to get it down to 10%, is a big decision. If GE is 60% of your portfolio and you want it to be 10%, you must sell 50% of your portfolio. That's much more than a course correction.
For those in this boat, I suggest you do not place just a big sales order. Instead, you place a sales order for maybe 2% of your GE inventory and plan to make a small sales order every week until you get the GE position to 10%.
It's better to make many small steps in the right direction, than nothing because you will not risk selling the entire store just before GE returns.
Every time you sell some stock, you have some money to invest. If you are interested in any of the shares I follow, click here to be notified when I write about them.
This article is part of a series I write for those who want to get their portfolios back on track. To be notified when the next appointment is published, click .