I Sold Pfizer at a 13% Loss – Here’s Why I’m Choosing Stability Over Risk

The purpose of investing in stocks is to make money, not lose it. So selling shares at a loss can be very upsetting.

In this Reddit post, we have someone who sold shares of Pfizer at a 13% loss. But they had their reasons for it. And when we dig in, it becomes clear that it wasn’t necessarily a poor choice.

When you need to diversify

Generally speaking, selling stocks at a loss is not what you want to do. But sometimes, it makes sense. One such situation is when a specific company starts to occupy too much real estate in your portfolio.

That’s exactly what happened here. The poster says that 25% of their portfolio was Pfizer stock, and they had to unload their shares because of that.

Now in a situation like this, there’s usually one of two reasons why a single stock comprises such a large share of total assets — either it gained a lot of value in recent years, or the investor is a company employee with stock grants and gets shares on a regular basis.

When we look at Pfizer’s performance, we can see that it’s down about 4% year to date as of this writing. On a one-year basis, it’s down about 12.5%. And over the past five years, it’s down over 25%.

The more likely scenario, therefore, is that the poster has been granted shares of Pfizer on an ongoing basis. And in a situation like that, unloading those shares is important.

Of course, there may be a third explanation — that when the poster built their portfolio, they simply did not diversify from the start. But either way, it’s not a good thing to have 25% of your portfolio in a single stock. So the poster made a good call, despite taking a loss. Now, they can make room for different stocks in their portfolio with the money they freed up.

How to benefit from capital losses

There are different reasons to sell a stock at a loss. One is if it comprises too much of your portfolio. Another is if the stock has consistently been losing value and you expect it to continue losing value.

The good news, though, is that you can use capital losses like this to your advantage. One way to do so is to offset gains.

Say you sell shares of stock that result in a $5,000 loss. If you have a winning stock in your portfolio whose position you would like to reduce, you could sell it at a $5,000 gain.

Normally, that $5,000 gain would result in a tax bill for you. But if you have a $5,000 loss to offset it, you can minimize your IRS burden.

Also, if you don’t have shares or assets to sell at a profit, you can use capital losses to offset up to $3,000 in ordinary income. In the example above, say you take a $5,000 loss but have no gains. You could offset $3,000 of income and carry the remaining $2,000 into the next tax year.

It pays to sit down with a financial advisor if you’re looking at potential losses in your portfolio. They can help you decide what to do and use those losses strategically.