How to Build and Manage a Portfolio of Stocks

Susan Dziubinski: Hello, and welcome to a special edition of The Morning Filter. I’m Susan Dziubinski with Morningstar. Each week on The Morning Filter, my colleague Dave Sekera and I discuss what’s going on in the markets, share some new Morningstar research, and offer viewers stocks to investigate further. But today’s episode is more about the forest and less about the trees.

In this week’s The Morning Filter, we’ll be discussing strategies for investing in stacks, how to think about stocks as part of a broader portfolio, and how to monitor the stocks you own or keep on a watchlist. We of course recognize that investors have their own stock investing strategies and styles, their own personal investing goals and tax situations. But we hope today’s episode will provide viewers with some food for thought or maybe a few key takeaways you can use in your own strategy.

Today’s episode has two parts. Part one is an interview with Morningstar Portfolio Strategist Amy Arnott about considerations when building and monitoring a portfolio of stocks. And part two is an interview with a familiar face, Morningstar US Market Strategist Dave Sekera. Dave and I discuss different ways to take positions in stocks, how to monitor the stocks you own or keep on a watchlist, and how to know when to sell a stock.

Amy, many if not most of the viewers of The Morning Filter invest in individual stocks. But before we get to that, let’s talk a little bit about the pros and cons of investing in individual stocks versus investing in, say, a managed product like a mutual fund or an ETF that invests in a basket of stocks.

Amy Arnott: I think the biggest advantage is you have the potential for much higher returns if you’re able to find the right stocks. Going back to Peter Lynch talking about tenbaggers, which were stocks that could multiple their value by at least 10 times since the purchase price. And I think some people really enjoy the process of doing research on individual stocks, especially if it is something that dovetails with your area of expertise. So for example, if you work in the healthcare field, you might be interested in doing research on pharmaceutical companies or medical devices, things like that.

The disadvantage is it’s very hard to find those winning stocks. And it does require additional research. And the odds are really kind of stacked against you in terms of finding stocks that will end up with big gains. So if you look at a year like 2023, for example, the overall market was up about 26%. But of all the stocks in Morningstar’s database in the US, almost half of them had losses for the year. And I think another way of looking at that is there’s some research from a professor at Arizona State University, Hendrik Bessembinder. And he looked at large universe of stocks over a long time period and found that almost half of them failed to outperform the three-month Treasury bill. So like I said, very hard to find stocks that will pay off and also a much higher chance of losses.

Dziubinski: So given that, if investors, say, want to do that research or feel like they do have a little bit of that edge, say, as you said, maybe in healthcare if you work in healthcare, and you do want to buy individual stocks, how should an investor be thinking about individual stock ownership in context of their other invested assets? Should they be thinking, “Oh, this is a separate pool of money”?

Arnott: Yeah, I think I like to think of it as a separate pool of money. I wouldn’t recommend investing in individual stocks in your 401(k) or your IRA because that’s money that you’re really counting on for your retirement. So I kind of like to think of it as something off to the side where you’re hoping for the chance at building long-term wealth, but it’s not going to throw your entire financial plan out of whack if it doesn’t pay off.

That said, I do think no portfolio is an island. So you do have to kind of look at things in the context of all of your holdings. And for example, if you are buying technology stocks on the individual stock side, you probably might own a lot of the same stocks if you own an index fund or ETF. So I think looking at something like Morningstar’s Portfolio X-ray, which can help you figure out where the overlap might be is a good way to avoid being too concentrated in individual stocks or a particular investment style or sector.

Dziubinski: So then given that people typically have those individual stocks coexisting with other investments, again, what should they be aware of when they’re managing those stock holdings? Besides perhaps, you know, “Oh, I already had tech exposure, adding Microsoft, let’s say, is just going to increase my tech exposure.”

Arnott: Yeah. So as I mentioned, potential overlap with individual holdings is a potential issue. So if you own stocks like Apple AAPL, Microsoft MSFT, Nvidia NVDA, for example, and you also own an S&P 500 index fund, you’re also doubling up on, you’re getting kind of double the exposure to those names. And I should mention that I do own shares in Apple and Microsoft. So just wanted to get that.

Dziubinski: So you’re doubling up on those.

Arnott: Right. Guilty of the same problem. And, again, I would also look at overlap by style and sector, and especially with the big runup we’ve seen in the “Magnificent Seven” and other technology stocks, I think a lot of people might be pretty heavy on technology stocks and large-growth stocks in general.

Dziubinski: And it’s not that that’s necessarily a bad thing. You just need to have the awareness of that.

Arnott: Right. And maybe, think carefully before you add any additional exposure.

Dziubinski: Now, you’ve built what we call at Morningstar a Role in Portfolio Framework. And we’re going to provide a link to that beneath this video for people to check it out. Now, in a nutshell, explain what the framework is and how an investor’s allocation to individual stocks plays in that framework.

Arnott: The Role in Portfolio Framework is a way of kind of taking a step back and thinking about what you want your whole portfolio to look like, given your time horizon and your financial goals. So instead of kind of jumping right into “is this a good stock” or “is this a good fund,” thinking about what type of fund or a stock might make sense in your particular situation. So for individual stocks, we recommend a holding period of at least 10 years and, as Warren Buffett says, ideally forever. That’s what I try to do with individual stocks in my own portfolio. And then also, you want to keep exposure to any specific stock limited. So ideally less than 5% of assets.

Dziubinski: Got it. Now, each year—another year, you’re very busy, Amy—each year you also compile a list of 15 stocks that have destroyed the most wealth over the past decade, and 15 stocks that have created the most wealth over the past decade. So I want to talk a little bit about both of those.

When it comes to monitoring the stocks that you own in a portfolio, what can investors learn from those stocks that over the past decade have destroyed the most wealth? Are there qualities that these stocks had in common, flags that maybe investors should be looking for that they can learn from the lessons of these stocks?

Arnott: I think one common thread was the lack of an economic moat, which is something that our stock analysts put a lot of emphasis on. If you’re going to be buying an individual stock, you want to make sure it has a sustainable competitive advantage. And I think 13 out of the 15 biggest wealth destroyers did not have any type of economic moat, and that ended up hurting their stock price performance. Fundamentals are also an underlying factor. So if you see deteriorating revenue growth or profitability or declining cash flow, increasing debt, those are all warning signs that you would want to look into a bit more.

And other than those two things, there were really a variety of problems for the stocks that destroyed the most value. Some of them were very acquisitive. General Electric, for example, which actually was on the top of the list for biggest wealth destruction, at one point, it was very successful company and had this acquisition strategy where it wanted to be a conglomerate with businesses in many different areas. But it spent a lot of money on acquisitions that really did not pay off and ended up getting into a lot of areas where it may not have necessarily had an edge. A few other issues that we saw were management problems, external factors that really hurt their results, or just generally failing to keep up with competitors, or failing to innovate in a company like Biogen BIIB, which has had some issues with its new drug pipeline.

Dziubinski: Let’s flip that then. Let’s look at the 15 greatest wealth creators over the past decade. What did those companies have in common?

Arnott: It’s kind of the flip side of the first two factors. We found that most of them did have a wide economic moat. They had very strong underlying financial performance. And another interesting thing that I found is that many of them had actually not been successful—not just for the past 10 years, but even before that. So even a company that is very large and successful, you know, like Apple and Microsoft, again, those types of stocks, if the company is able to sustain its financial performance, they can end up performing very well for many, many years. And so I think that’s one of the reasons why you don’t want to sell too early. And ideally, just kind of, you know, if a stock is doing well and there aren’t any red flags, just hold on to it as long as you can.

Dziubinski: Sounds like Warren Buffett. Many people own stocks from their employers in their portfolio. Maybe they were granted the stock by their employer, or maybe they’ve invested in the stock of their employer because they like their company, they know the industry, and they want to participate. Are there any guidelines you have for investors who are doing that? What should they be thinking about when they do own company stock?

Arnott: Again, I would really try to keep your exposure limited to 5% of your total assets or less. And especially when it comes to your retirement portfolio, if you’re loaded up on individual stocks, that can be really risky, especially when you consider the fact that your job and a lot of your financial well-being is already tied to the company. So if you have exposure to the same company stock, you are kind of doubling down on that potential risk and you don’t want to end up in a situation where the company’s fortunes take a turn for the worse and you end up losing your job through a layoff and taking a hit to your portfolio at the same time.

I think a lot of people like to participate in employee stock purchase plans, which often allow you to buy your employer’s stock at a discount, usually 15%. So those can be very attractive programs because you’re getting that discount. But I think if you do participate, again, you want to keep your overall exposure limited and try to sell your holdings on a regular basis. So you need to hold them for a certain period of time in order to get more favorable tax treatment. But after you’ve held for that period, I would try to just make sure you’re selling on a regular basis.

Dziubinski: Let’s talk for a second about taxes. Some investors may have the opportunity to own stocks in a tax-deferred account, maybe through a brokerage window in their 401(k) or through an IRA. How should investors, perhaps, what should they be thinking about when thinking about taxes and stock ownership? Should taxes really be helping drive that decision?

Arnott: I think it’s something to think about, but there are a few different factors to look at. One is dividends. So if you’re buying stocks that pay dividends, you are going to have to pay taxes on those dividends, usually 15%, if it’s a qualified dividend. So that would be an argument for keeping it in a tax-deferred account, like a 401(k) or an IRA. On the other hand, as I mentioned toward the beginning, I don’t think you really want to be counting on individual stocks to fund your retirement. So from that perspective, I think keeping it off to the side in a taxable account can make sense, just to make sure you are kind of mentally separating it from your other holdings. And the other advantage of keeping stocks in a taxable account is you can do tax-loss harvesting. So if you do end up with a stock that ends up with a big loss, you can sell and then take advantage of that realized loss to offset ordinary income up to $3,000 or offset realized capital gains in other parts of your portfolio.

Dziubinski: Amy, thank you so much for your time today. Good to see you.

Arnott: Good to see you, too. Thank you.

Dziubinski: I’m sitting down today to talk with Dave Sekera about stock investing. A couple of things before we begin is that Dave’s opinions that he’s sharing today are his and not necessarily the opinions of Morningstar Research Services. And we also want to acknowledge that investors pursue different and personal investment strategies and therefore nothing that we say today should be seen as or viewed as investment advice. All right, Dave, let’s dive right in.

We talk a lot on The Morning Filter about stocks to buy based on Morningstar’s ratings. You know, we say they look “attractive.” They look “undervalued.” So, acknowledging that investors have their own investment strategies, goals, approaches: How might an investor use Morningstar’s framework to make investment decisions around stocks?

Dave Sekera: I always start off looking at our star ratings. And what the star rating really is is it’s a reflection of just how far we think a stock is either trading above or below the intrinsic valuation as determined by our equity analyst team. And of course, we then have an Uncertainty Rating that’s the overlay on top of those star ratings. Based on the uncertainty of a stock or how well we think that we’re going to be able to model out the cash flows of that company over time, we have a range of different areas that the stocks can trade before they become overvalued or undervalued. So example, a Low Uncertainty Stock doesn’t need to move that far away from its intrinsic valuation before it could move into a 2-star or 4-star category. Whereas a company that has a Very High Uncertainty Rating—that we’re going to let run to the upside before we’d recommend to sell it. And then vice versa, we’d actually look for it to go even further down to the downside, have enough margin of safety, before we’d really consider it to be undervalued.

When we look at the star ratings, 4- and 5-star-rated stocks are those that we think are particularly undervalued. And then star ratings with 1 or 2 stars are those that we think are overvalued. And of course, a 3-star stock just means that that trades within the range that we think is fair value. For 3-star stocks, I would look at those as stocks that, over time, we would expect investors to return essentially the cost of equity of that underlying company.

And of course, then we also have our moat rating. We do look to determine does a company have long-term durable competitive advantages? If so, how long will those advantages last? You know, will this company be able to generate excess returns on invested capital over its weighted average cost of capital? So those companies that we think are going to be able to generate those returns for at least the next 10 years, those are companies that we would probably rate with a narrow economic moat, and then companies where we expect that they have those durable competitive advantages that will allow them to be able to generate excess returns for 20 years or more, those are going to be the ones that we rate with the wide economic moat.

So really it’s a combination of a number of different things: using those star ratings, looking at the Uncertainty Rating, and of course using the economic moat. Because again, I always prefer to invest in a company that has long-term durable competitive advantages that we can rely upon.

Dziubinski: Then let’s talk a little bit about actually taking a position in a stock and different ways that investors could do that. They can build a position over time. That’s one approach, or they can kind of back up the truck. Personally, Dave, are you more of a take a position over time or back up the truck kind of investor?

Sekera: Personally, I’m much more of build a position kind of person. And the reason is because no matter how much you may be confident in the valuation of that stock, market dynamics, sentiment, news flow, noise, really it all can move stocks around the market around to the downside. So again, if you back up the truck and you buy an entire position all at once, you’ve got nowhere left to go. So personally, I like to build into a position over time.

Dziubinski: Now, let’s talk exactly like how someone could do that. So is it time-based? You’re deciding that you want to invest x dollars now and then decide at a specific time later that you want to put more dollars toward it? Or is it more based on a stock’s price? I’m buying, I’m taking the initial position at this price, but then when it hits this price or if it goes down to this price, I’m going to add dollars to that position?

Sekera: Personally, I start off with trying to understand how this stock fits in within my overall portfolio. Taking a look at how I already have my portfolio structured, whether it’s by capitalization, whether it’s by style or sector exposure. And then I want to decide, well, how much money do I think I want to have in this one individual position based on all those other dynamics, your own risk tolerances, and so forth. Once I’ve decided how much money I would like to have as considered a full position in that individual stock, personally, I usually start off with like a third- or a half-sized position. And then from there, I’m going to set two price targets, one to the upside and one to the downside. So worst-case scenario, let’s just say that you bottom-ticked it and that stock starts moving up and then it moves up enough to hit that upside target, reevaluate, if that target is now well above what you think that stock is worth, the worst case is you made money on that half-sized position.

Now to the downside, you set a price target and again, you kind of want to pick what that price target is based on the natural volatility of that underlying stock. If it does go down and hits that price target, the first thing I do is reevaluate my investment thesis. I’ll look to see, is there any new news that has come out that could fundamentally change how I think about this company or think about this company’s valuation? And if so, and let’s just say that the news was negative, you think the company isn’t going to be as highly valued, that stock goes down, that’s actually probably an opportunity to go ahead and sell it. Your first loss to the downside is sometimes your best loss. Now conversely, there’s no new news. Maybe this is just the market moving around. Maybe it’s just some negative sentiment on something that’s really more noise than news. That thing gives you the opportunity to buy maybe another quarter-sized position. And then from there, set your target to the downside again. If that stock moves down further, again, you reevaluate. And again, if that point in time, there’s nothing that makes you really think that the company is worth less, then you can buy that final quarter-sized position. So to some degree, you are dollar-cost averaging on the way down.

Dziubinski: Do you see any, personally, any situations where you would back up the truck? Let’s say you have a company on your watchlist. This maybe happened to investors with Meta Platforms META a couple years ago. Meta lost something like 26% in one day after a bad earnings report. Morningstar came out. Morningstar stood by its fair value estimate of the stock. Would that have qualified as a backup the truck situation for you if you had had Meta on your list? Or would you still ease into something like that?

Sekera: I’m a conservative investor by nature, so I’m still a build a position kind of person. And in fact, in a situation like that, I think it’s probably even more important to build into a position. Because again, if you have that large of a change in the market price, obviously something fundamentally, or at least the market is interpreting that fundamentally something different has changed. And so I think it gives you the opportunity really to dig deep into your own analysis, understand what is the market pricing in, where do you think the market might be wrong in this case. The other part, too, is when you have that large of a move in any one individual day, more likely than not, I would suspect that there’s probably still going to be people looking to exit that stock. So again, there still could be some market technicals that even when it has one big move down, it probably still has further to go. So again, you can layer into that position and dollar-cost your average down.

Dziubinski: Let’s talk a little bit about investors monitoring their portfolios and the stocks they own. Investors—I’m assuming the answer to this is going to be yes—investors in your mind should always have a sell price in mind for those stocks. How do those sell prices evolve over time?

Sekera: I think you always need to have ideas in your mind of where you should be selling stock and where you should be buying stock, even before you enter any individual position. So first of all, I’ll rely pretty heavily on Morningstar equity analysts as far as what their view on that stock is. And then look at the ranges where something might move into that 2-star category, which of course is going to be based on our Uncertainty Rating. So therefore, if the market starts getting ahead of itself for whatever reason and that stock starts to surge, that’ll give you the opportunity once it hits that target to decide at that point in time based on your own portfolio dynamics, if it’s a good time to, at least, if nothing else, maybe sell a little bit, not necessarily the whole position, but take some off the table, lock in that profit, and then that way if that stock does retreat and start coming back down, you’ve got the ability to buy back into that position and having captured that profit.

But there’s a number of other different things I think investors need to do, too. So instead of only just relying on the Morningstar equity research analyst team, I think it’s also important for you to do some of your own due diligence, some of your own research. I would listen to the earnings conference calls or read the transcripts thereafter. Most companies will have investor presentations on their websites. I think those are very important as well. And depending on how deep you really want to get into it, I’ll look at the competitors’ websites. I want to see what they’re saying in their investor relations sites, what their investor presentations are, kind of keep up with what’s going on with the competition there. And of course, you always need to keep up with just general business news, Wall Street Journal or whichever source you want to use for that. And then lastly, maybe some of the more industry-specific news based on what that company does.

Dziubinski: You mentioned earnings. And we also talk a lot on The Morning Filter, every week I’m like, “Dave, what earnings are you keeping an eye on?” What in general, in your opinion, do you think investors should be looking out for when it comes to evaluating their companies through earnings season? What are they looking for in those reports and the forecasts?

Sekera: When I’m thinking about earnings and where they come out, I’m really looking for “are earnings coming out within the range that we expected?” And if they’re coming out within the range that we expected, there might be a couple percent movement in our fair value up or down, as our analysts are going to readjust their model every single quarter. But other than that, what’s different? And if there’s something different, that’s when the real homework begins, trying to understand if there’s movement in earnings, maybe they miss, is that just because of maybe the macroeconomic environment is weakening? Or is there something really fundamentally changing within their underlying business? And if there’s something that’s underlying in their business that’s changing, some kind of catalyst there, really you need to dig into that and understand what’s going on. And if that really ends up bringing your view of the value of that company down, conversely, if they just knock the cover off the ball, earnings are going up much higher than what you expected. Again, a good time to just fundamentally relook at the company. Is it just because it’s a hot economy and so they’re able to sell a lot more than what they expected? Or is there just something changing in their product line? Think about all the AI companies and just how quickly that developed and how much growth is now being expected there versus even what we were expecting a year ago. So again, in that case, fundamentally, we’ve increased our fair values quite a bit on a lot of those stocks. So you also want to make sure that you’re adjusting your sell price target upward as well, as those fundamentals change.

Dziubinski: Now you mentioned Morningstar’s analysts and changing fair value estimates after earnings maybe up or down. What’s a meaningful change for a fair value estimate change versus one that’s just maybe adjusting the time value of money or a small tweak to the model?

Sekera: That’s also going to depend on the company, the sector it’s in, but largely I’ll look at our Uncertainty Rating. So if I’m looking at a company with a Low Uncertainty Rating, I’m only going to expect to see a couple percent change either way after earnings, any one individual quarter. So if it’s a Low Uncertainty or maybe even a Medium Uncertainty, if it’s above like a 5% change, that might be a little bit more significant than of course the company that’s a High or Very High Uncertainty Rating. So for a company with a Very High Uncertainty Rating, I wouldn’t be surprised to see in any one individual quarter us change our fair values maybe up 5% to 10%. It starts getting into the double digits, starts getting to be 10% or more, that to me is a pretty significant change even for a company with a Very High Uncertainty Rating. And in that case, I’m really going to read the note on that stock and really try and understand what do we change in our long-term assumptions in the fundamentals to drive that change whether it’s up or down.

Dziubinski: OK, so besides watching us on The Morning Filter and using Morningstar’s research, how would you suggest that investors perhaps find some other reputable, how do they vet sources? How do they find other reputable resources that can mesh with their individual approach to investing?

Sekera: Well, the first thing I really want to do is caution investors as far as what they read on different social-media channels. Again, until you know who that source is and whether or not they’re reputable, there’s a lot of misinformation that’s going to be out there whether it’s on X or Facebook or on Reddit and some of the chat boards there. So I’d be extremely cautious when you use any of that information. Personally, I will use a lot of other different resources. Of course, we have plenty here at Morningstar. The Wall Street Journal, Bloomberg would be some others that I watch pretty closely myself. And then I’ll watch a lot of the different industry publications. There’s a lot of specific publications depending on what stock you’re looking at in the sector that it’s in as well.

Dziubinski: Let’s talk about what many might consider to be the hardest thing to figure out. How do you personally know when to sell a stock? Investors will often say it’s much easier to figure out when to buy one than when to sell one. I’m assuming you’re going to say it’s something like more art than science.

Sekera: Well, exactly. And actually, I would kind of agree with that. Sometimes I personally just find it easier to decide when I think a stock is undervalued and looks attractive and when to buy it. And like you said, sometimes the hardest idea is trying to understand when to sell it, especially when it’s running to the upside and there’s a lot of momentum behind it. You don’t want to sell it. You kind of want to let those profit run. But at the same point in time, you also want to make sure that you are taking profit to the upside. So again, that’s why it’s important to have kind of those upside price targets. When they hit those targets, kind of reevaluate what’s different now than when I first bought this stock. Again, maybe you need to raise your price targets. Maybe it’s a long-term secular theme that continues to keep growing. And maybe that stock is worth more now than what it was when you first bought it. Or conversely, again, there might be no new news. It’s just the market sentiment is running hot for whatever reason. And again, that’s a great point in time to go ahead. Maybe not necessarily sell the whole position, but at least take a little money off the table, lock it in. And if that stock retreats, you’ve got the ability to buy it back cheaper.

Dziubinski: Talk a little bit about Morningstar’s ratings framework and selling. How might an investor, from your perspective, use that ratings framework to help make the sell decision? So is it a stock hits 3 stars? You think about selling? Is it 2 stars? What might an investor do with that?

Sekera: First of all, you have to also realize, too, like a 3-star rated stock is certainly not a sell. So when I think about a 3-star rated stock, that means that stock is trading within the range that we consider to be fairly valued, and for a long-term investor, assuming everything kind of pans out as we expect, we’d expect that the stock will end up giving you a total return over time in line with the cost of equity of that company, depending on the Uncertainty Rating, it could be 8%, 9%, 10% somewhere in that area, which on a long-term perspective are still pretty healthy returns. Now when it hits 2 stars, that means on a risk-adjusted basis, we think that that stock is starting to get to be overvalued as compared to the company’s cost of equity. Now at that point, it’s a good time to kind of reevaluate your own investment thesis, depending on how risk-averse you are. Maybe it is a good time to take some off the table. Other investors who are more willing to take higher risk and kind of willing to trade the momentum there, maybe they’re going to let it run a little bit higher. And of course, it also just really comes down to what part of your portfolio does that stock play? And depending on what part that plays in your portfolio, maybe even at a 2-star rating that is something you might want to hold.

Dziubinski: Yeah, up to the individual situation as usual. So how do you think about personally moving out of a stock position? You said you kind of prefer to build a position over time. Is that how you think about leaving, exiting a position over time? Or do you see scenarios where it is sometimes just best to move out of the position, the entire position, at one time?

Sekera: Yeah, and again, I mean, everyone’s got their own different style. In my personal view, if a stock is running to the upside, that’s where I want to scale out of a position. As it moves up, sell maybe a quarter size, third size, as it moves up further, then you’ve still got stock you can sell. Conversely, if it moves back down, you can always move back into that position. So the downside is where it’s really difficult to decide when you want to sell that stock. So for example, if it’s a stock that is falling, the fundamentals are deteriorating, maybe our equity analyst team has reduced our fair value quite substantially, in that case, maybe it’s better off just to exit the position, get that risk off of your own books. And again, you can always reevaluate that position if the stock has fallen enough that you think it’s attractive, you can always buy back into it. But again, I think it’s that downside where, more likely than not, if you want to get out of a position, you’re just better off just getting out of that position and then to the upside probably scaling out of it.

Dziubinski: Got it. And then lastly, Dave, we know you’re not a tax advisor, financial advisor, any of that, but you can’t give tax advice. But of course, there are often tax costs associated with investing in individual stocks, particularly when you’re going to sell them. How do you think about taxes when it comes to selling or moving out of a stock position?

Sekera: Well, let me be a little bit of an economist here. On the one hand, when I look at stocks, I really try and just focus on the fundamentals. What is the long-term intrinsic value of this company? Where is it trading in the marketplace? And I really want to focus on that for my sell decisions, irrespective of what the tax implications may be. Now, being the economist, on the other hand, you do also have to understand what the tax implications are before you sell a stock. So again, if it’s maybe a stock that you haven’t held that long and maybe it’s about to go from a short-term to a long-term gain, and you’re comfortable owning it for a little bit longer, maybe then you go ahead and hold it until it moves from that short-term to that long-term. Or conversely, maybe it’s late in December and you can hold it until January of next year, so that way, the tax implications will be the next tax year as opposed to having to write a check on those gains the next April. So again, fundamentally, you should probably always really be focusing on what’s the right thing to do. But it is important to take a look at some of those tax implications. And then, of course, at the end of the year, too, it’s also important to take a look at your portfolio. See where you might have some embedded losses, especially for stocks where maybe the fundamentals are weakening. It might be better off just locking in those losses and then using that to be able to offset some of your gains where you may have elsewhere and do that tax-loss harvesting.

Dziubinski: Dave, thanks for your insights, today. It’s great to see you in person in the studio.

Sekera: Thank you, Susan.

Dziubinski: We hope you found at least a nugget or two in today’s episode that you can use in your own investing. And next week, Dave will be back from his break. So be sure to tune into The Morning Filter next Monday at 9 a.m. Eastern, 8 a.m. Central. In the meantime, please like this video and subscribe to Morningstar’s channel. Have a great week.