In seven months, ExxonMobil stock has gone from the low $30s to around $60. On paper, shareholders who have held on have almost doubled their money in less than a year.
While that makes participants in the ExxonMobil Savings Plan who own XOM feel better, it doesn’t entirely relieve the angst associated with remembering that they bought other shares at $70, or $80, or $100.
What should you do, now that the price has doubled? Double down and hold on, or take advantage of the price rise, cash in some of the shares, and look elsewhere?
Investing is always forward-looking. What’s the best opportunity for my investment dollars going forward? As circumstances and portfolios change, re-evaluating your holdings from time to time is prudent.
With inspiration from a recent Ben Carlson blog, here are four questions we think participants in the EMSP who own XOM stock should ask themselves as they consider next steps with their portfolio.
1) Why are you holding ExxonMobil stock in the first place?
You may own ExxonMobil stock because you think it is a profitable long-term investment. Some like to own it in the EMSP because quarterly dividends can be distributed as extra income outside of the account. You may plan on retiring early and using the NUA strategy to take care of your living expenses before age 59-1/2. And some of us own it simply because we think that’s the right thing to do as an employee or retiree.
Whatever the reason(s) you’re holding XOM, we recommend you think through your rationale for putting money there. Reassess whether that objective is still relevant or meaningful for you. There’s no shame in changing one’s mind when circumstances change.
2) Are there better investment opportunities available?
We don’t trade frequently, and we don’t advocate trying to time the market. That’s a loser’s game. But from time to time, we find that some investment classes are likely to perform better over our investment time horizon than others. For example, looking out over the next five years or so, you might decide to under-weight US large-cap equities and over-weight international equities, in light of current valuations and anticipated future returns.
We don’t forecast the performance of individual company stocks, so you won’t get a recommendation from us on how ExxonMobil will perform over your investment horizon. But because investing is all about the future, we believe it’s advisable for you to consider how different asset classes are likely to perform under expected economic conditions and adjust your portfolio accordingly.
If you had in cash the total value today of your ExxonMobil shares, would you buy all those shares? Fewer? More? That might be a clue as to whether you think there are better opportunities available.
[ Read Next: 4 Investing Mistakes in the EMSP ]
3) How are you allocated overall?
Because doing what we just suggested in the preceding paragraph is hard for many people, some investors have a rules-based allocation for their investments. By that, we mean they determine what percentage of their portfolio will be invested in different asset classes (e.g., U.S. large stocks, U.S. bonds, international equities). Then they periodically determine whether their actual portfolio has diverged significantly from what they originally intended.
For example, if you wanted Equity Units (a proxy for the S&P 500 index) to comprise 40% of your portfolio, possibly it’s now closer to 50%. Similarly, XOM could have gone from 10% of your portfolio to 15%. Ask yourself the question, “Am I comfortable with this percentage of my account being in XOM stock?” If not, make the change.
4) What will bring you the most regret?
There’s an ancient Greek aphorism attributed to Socrates: “To know thyself is the beginning of wisdom.” It can have many applications, ranging from alcohol consumption to spending habits to your skill at the blackjack table.
In the investing world, knowing oneself means, in part, understanding how you’ll react to the inevitable ups and downs in the markets.
Are you someone who can hold on during the expected bear markets? Did you handle March 2020 with stoic equanimity, for example? Or does the drop in the market value of your account make you question your plans, consider pulling out altogether, or moving everything into Common Assets? Knowing how you react can help guide you on asset allocation and what kind of help you might need from an advisor.
As you evaluate the possibility of selling off some of your appreciated XOM shares, you face two possible sources of regret. You might sell and the stock continues to go higher; or you don’t sell and the stock price drops back to the $40s or the $30s. Which outcome would cause you the most regret? Missing out on gains or experiencing losses you could have prevented? Minimizing regret may not be the best financial decision in the long run, but living with lots of regret isn’t a recipe for daily happiness and satisfaction. Know thyself.
[ Read Next: 4 Strategies to Deal With XOM Stock in the EMSP ]
These are all hard questions, but important ones that can be applied to any part of your portfolio. If you can answer these questions honestly and accurately for yourself by yourself, congratulations!
We’re not recommending selling or holding or buying XOM. But if you’re an ExxonMobil shareholder and thinking about whether you should hold or sell, enter a comment on my LinkedIn page and let others know—not necessarily what you’re going to do, but rather how you’re thinking through your decision. What’s most relevant for you in making this decision? What’s leading you one way or the other?
And if you would benefit by discussing your thoughts with an experienced advisor, we’re available. If you’re within five years of retirement eligibility and anticipate having at least $1 million in investable assets, give us a call. Let’s talk!
Disclaimer: The information provided here is general and intended as educational in nature. It is not intended nor should it be considered as tax, accounting, or legal advice. Investec Wealth Strategies and its advisors do not provide tax, accounting, or legal advice. We recommend you seek the counsel of your attorney, accountant or other qualified tax advisor concerning your situation. Information about the ExxonMobil Savings Plan is believed to be accurate, but no guarantees can be made, as Plan details are subject to change by the Plan sponsor. The author is not an employee of ExxonMobil and his views are his own.