Should We Sell Our CBA Shares?
Hi Scott,
We got Commonwealth Bank shares when the bank was floated years ago. Until recently they were worth $100,000, but now they have plunged to just $74,000. We are retired and self-funded (income about $70,000 combined) and do not want to watch them disappear! What is your recommendation?
Bernice
Back it up,
Bernice!
I’ll answer your question in a moment, but first, for the benefit of younger readers, let me give the backstory:
The Commonwealth Bank floated on the share market in 1991, for $5.40 a share. The minimum you could purchase in the float was 400 shares -- so you BPAY’d your $2,160.
A few weeks later you ticked the ‘dividend reinvestment plan’ form.And then you sat back and ate kabana.
Fast forward to today.
Your $2,160 investment is now worth … drum roll please ... $138,400.
(So, given you say your shares have ‘plunged to $74,000’, I’m assuming you have sold some along the way.)
Yes, my nipples are getting hard, but let me give you one more amazing stat: last year CBA paid out $4.29 per share in dividends … that’s 80% of what you initially paid for each share!
Okay, so that’s the backstory. Now let me answer your actual question -- should you sell your CBA shares?
The answer is … it depends. If your CBA shares make up more than 30% of your portfolio, it would be wise to sell down part of your holding and diversify by investing in other companies. (This doesn’t just apply to CBA shares; it’s not good to be too reliant on any one company.) It’s even more attractive if you’re holding the shares in a self managed super fund (SMSF) and you’re in pension phase, as there are no tax consequences. Either way check with your accountant. Winner, winner, chicken dinner!
Scott