AboutPaul Henneman Expertise Stock forecasting and fair market valuations.
Experience
Past/Present clients CBSMarketwatch.com, Hoovers.com, Multexinvestor.com, Bank of NY, numerous hedge funds and institutions, other partners and clients can be viewed at http://www.valuengine.com/about/careers.html
Question I recently found out that I have 48 shares of stock in Prudential Financial (PRU), that I didn't know I had. I did some research and learned that the company assigned stock years ago to it's customers based on the polices they have with them. When I found out about these shares, it was trading at about $90.00, and has since fallen dramatically. It is now at about $73.75. Since I didn't even know I had it, I could take the money out and use for other needs and not really miss it. Do you recommend leaving it alone to see if it increases in value, or should I take the money? If I do cash them, what are the tax implications? I know nothing about the stock market and as such, own no other stocks.
Answer Dave,
Thank you for your question!
First the easy part: yes, you would have to pay taxes on the proceeds if you sold the shares. It is based on profits, so if you cannot prove that you paid some specific amount for the shares in the past, you will likely have to pay tax on the whole amount. However, if you paid some amount originally for the shares, you would only pay tax on the profits from selling the shares.
Now, the harder question: what to do with the shares. This depends alot upon you, and how you feel about investing.
My reseach company tracks Prudential, and our models indicate that it is undervalued, and will increase in stock price in the next few years by about 20%. Your current shares are worth about $3,456 at today's stock price, so a 20% return over several years would not exactly be a life changing event.
However, if you do invest that roughly $3,500 in some sort of retirement fund, you could easily earn an average of about 11% a year. Some years will be worse, some much better, that is an average figure. I don't know your age, but if you let that investment work for you for 30 years, your returns would compount to a total value of about $80,000. And, if you added to your investments $100 per month, every month for those 30 years, you would have a total of about $350,000.
You can see above the power of returns over time. The longer the investments have to work, the more power they have. So many people make the mistake of trying to build wealth in a short period of time, it reasonably takes decades.
If you are interested in the above, please do not hesitate to follow up with me with any questions. There are a variety of retirement accounts that could be used to dramatically reduce the amount of taxes you will need to pay.
However, if you you are not interested in the work and dedication that a real financial plan takes, and the time it needs to be fully effective, you could certainly cash out and have a nice chunk of cash available for you right away. I wish you the best regardless of what you decide to do,
Best Regards,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com
