Question on investing in stocks

[Mumneedstea]

Hi all,

A few years back I started putting some money into eToro - started off with some random stocks and then I started following world events a bit more and put more thought into what I'm investing in. I come from a tech background, so a lot of what I buy tends to be tech related.

I'm starting to think I'm not doing this correctly. Do you sell your stock once it makes a profit and put that money somewhere else? I've only ever bought in etoro and as long as something is in profit, I've held on to it and never thought of selling it. As an example, I bought Palantir when it was quite low and in the last few weeks it has gone crazy and I'm sitting on some very nice profits. However, I will obviously not see the profit unless I sell the shares. Is that what etoro is meant for? Short term investment?

I don't think the Palantir surge will last that long and it will eventually fall, so should I be selling now and putting that money in my stocks and shares ISA which is more diversified? I have never given much thought to how to use etoro - everything I've bought so far has given me a decent return that is just sitting there, and I'm starting to think whether I should be more active - i.e. sell when something has made enough money and then buy other potential stock that is likely to go up. Or am I meant to hold on to it?

TIA :)

If you sell at a profit outside an ISA it's possible you will have a capital gain for tax purposes. Just to put this on your radar.

If we knew the right answer, we'd all be millionaires!

I don't invest in specific stocks because it's too risky for me. But if you've made a handsome profit on one, you could just count it as a success and sell up. Seems like a win.

If you're worried about foregoing future profits, you could liquidate half your holdings and keep the rest for another couple of weeks? That way you've locked in some profits either way.

This is exactly why I have a financial advisor because I can't be dealing with all of this malarkey!

One thing is if you're only investing in tech stocks then you're not sufficiently diversified unless you're taking a different approach in your stocks and shares ISA and have some ETFs?

You will get two schools of thought on this.

Buy and hold long term, hoping it 'goes to the moon' 🙄

Find decent entry and exit points, and don't be afraid to take profits.

Personally I do a mix of both. But don't buy into hype, really study the fundamentals of the company and where its going.

Try to get all your capital into the ISA ASAP or you'll be bogged down in tax returns for years.

I have been thinking of getting a financial advisor, but I was under the impression that I need upwards of 100k investment to do this, or else their fees are not worth it?

I do have most of my savings in stocks and shares ISA and the etoro account was just to play around with some individual shares, and money I can afford to lose if everything goes the wrong way

I need to check in capital gains tax. Are you saying that if I put all the profits into ISA, I don't need to pay capital gains tax on it?

Good point - I could sell half my position and keep the rest in the hope of more profits. Thanks!

Are you saying that if I put all the profits into ISA, I don't need to pay capital gains tax on it?

No. If you make a profit on something already in the ISA you don't pay tax. But anything outside an ISA or pension is subject to tax, you can't just pay the profits into an ISA afterwards.

This isn't the sort of question an IFA would advise on. They're for overall investment plans, not individual stock advice.

Ours didn't mention a minimum and in fact they wouldn't have known how much we have until they did the due diligence. It may be worth calling around. Esp if you have a few old workplace pensions that need consolidating.

This is the age old question of course.

There's no answer really. But the key is to decide on a strategy first, then run that strategy. That way, you know your strategy is running your decisions, not impulse reactions to changes.

For example, your strategy might include a tactic to top slice anything that increases over a certain percentage. So, say that's 50%, once it reaches that 50%, you take that, and leave a sum currently with your original investment.

You nay ask have a line that says to sell anything that drops by x%.

Both of these you can often set up to happen automatically in your dealing account, helpfully.

Obviously you would review your strategy regularly.

Then you need to decide what to do with the cash. You probably want to invest it again. What is your strategy for that? It may be that you invest profits into a safer tracker fund or something? Or you buy income delivering shares with profits from growth shares.

Re the tax, I only invest in my ISA for this reason. It's not even the tax itself, it's the paperwork to sort it all out, offsetting losses and gains. I can't be bothered with it!

Also, please don't pay an IFA to help consolidate pensions, it's really easy. Usually one form and wait a few weeks. I've done it several times myself.

Totally agree with PP.

If you sell you'll have to pay CGT on your profits. That isn't avoidable.

What is avoidable is not having to do a self assessment tax return every year if your capital is managed within an ISA. That is very liberating because you won't have to keep track of your P&L.

Also, don't treat tax as a barrier to trading. Take your profits, put aside the tax and put the rest in the ISA knowing you won't have to do it next FY.

Thanks for your input. That's a very good point regarding strategy - when it comes to my etoro investment, I've never had any strategy as it was only meant for small investments and having a play around with money I don't mind losing. However, it has grown over time, and ideally I need to sit down and compare my earnings from individual stocks and my ISA, to see which one is doing better in reality.

I wouldn't consult a financial advisor for combining pensions, but may look into getting one for better investment advice.

You say "compared with my ISA", but an ISA is simply a wrapper with special tax treatment. It's the investments in the ISA that are key. You can probably buy the same things in the ISA as you are in your app. If they're openly traded that is. My ISA has access to the whole stock exchange, and foreign exchanges. Though I never buy foreign stocks because the tax is annoying (especially US stocks, they don't recognise ISAs so even in an ISA you have to pay tax and the forms are extremely annoying!).

Just to clarify - the investment advice is why I'm recommending the IFA, the consolidation into the SIPP they manage for me was just a fringe benefit. It has since performed well so I am happy with that as opposed to leaving things in the various defaults they were in....

My DH takes a more active interest in the market so he has retained one ISA acct to play around himself. I don't think it is a bad idea to try it out for a year or so and see how it goes!

I do a mixture, sometimes I take some profit and leave the rest, sometimes I sell everything and wait to see if the price drops again.

Buying individual stocks is always gambling. No one knows whether they will go up or down, it's guess work.

This just isn't true.

I've built my own portfolio through carefully selected stocks. You just need to know how to properly evaluate the financial health of a company and its strategic direction.

"You just need to know how to properly evaluate the financial health of a company and its strategic direction.

Oh is that all!

It's partly true. You're still betting, even if you've carried out research that improves your odds of success.

There's no such thing as an infallible stock-picker - just ask Neil Woodford.

What helped me was thinking in terms of goals, sometimes I’ll take profit on a spike and move part of it into my ISA where it’s more steady. I’d recommend BabyPips for simple trading basics, it’s more for forex, but the tips on taking profits really clicked for me. Taking some profit off Palantir wouldn’t hurt.

Old thread I know, but you don't need to pay tax on US stocks held within the ISA. You fill out the withholding form and send it off to your platform provider, and it covers you for a set number of years. I hold plenty of US stocks, and don't pay taxes.

Huh?

Yes, you fill in the form and they deduct US withholding tax, that's what the form is for, it doesn't make it tax free. The US only recognises the tax protection in the UK of pension schemes.

Read Smarter Investing and hang out on the Uk personal finance subreddit for a bit.

You can trade as easily inside an ISA as you can with etoro. Many brokers now are free. If you have not used your £20k ISA allowance you could try transferring the shares before 5th April.