Diversify or keep current stock to increase capital gains
The biggest challenge with owning any individual stock is price fluctuation, which is called risk. The scenarios you describe assume that the stock behaves exactly as you predict (price/portfolio doubles) and you need to consider risk. One way to measure risk in a stock or in a portfolio is Sharpe Ratio (risk adjusted return), or the related Sortino ratio. One piece of advice that is often offered to individual investors is to diversify, and the stated reason for diversification is to reduce risk. But that is not telling the whole story. When you are able to identify stocks that are not price correlated, you can construct a portfolio that reduces risk. You are trying to avoid 10% tax on the stock grant (25%-15%), but need to accept significant risk to avoid the 10% differential tax ($1000). An alternative to a single stock is to invest in an ETF (much lower risk), which you can buy and hold for a long time, and the price/growth of an ETF (ex. SPY) can be charted versus your stock to visualize the difference in growth/fluctuation. Look up the beta (volatility) of your stock compared to SPY (for example, IBM). Compare the beta of IBM and TSLA and note that you may accept higher volatility when you invest in a stock like Tesla over IBM. What is the beta of your stock? And how willing are you to accept that risk? When you can identify stocks that move in opposite directions, and mix your portfolio (look up beta balanced portolio), you can smooth out the variability (reduce the risk), although you may reduce your absolute return. This cannot be done with a single stock, but if you have more money to invest you could compose the rest of your portfolio to balance the risk for this stock grant, keep the grant shares, and still effectively manage risk. Some years ago I had accumulated over 10,000 shares (grants, options) in a company where I worked. During the time I worked there, their price varied between $30/share and < $1/share. I was able to liquidate at $3/share.
The loss for B can be used to write off the gain for A.  You will fill out a schedule 3 with cost base and proceeds of disposition.  This will give you a $0 capital gain for the year and an amount of $5 (50% of the $10 loss) you can carry forward to offset future capital gains.  You can also file a T1-a and carry the losses back up to 3 years if you're so inclined.  It can't be used to offset other income (unless you die). Your C and D trades can't be on income account except for very unusual circumstances.  It's not generally acceptable to the CRA for you to use 2 separate accounting methods.  There are some intricacies but you should probably just use capital gains.   There is one caveat that if you do short sales of Canadian listed securities, they will be on income account unless you fill out form T-123 and elect to have them all treated as capital gains. I just remembered one wrinkle in carrying forward capital losses.  They don't reduce your capital gains anymore, but they reduce your taxable income.  This means your net income won't be reduced and any benefits that are calculated from that (line 236), will not get an increase. "As Dilip said, if you want actual concrete, based in tax law, answers, please add the country (and if applicable, state) where you pay income tax. Also, knowing what tax bracket you're in would help as well, although I certainly understand if you're not comfortable sharing that. So, assuming the US... If you're in the 10% or 15% tax bracket, then you're already not paying any federal tax on the $3k long term gain, so purposely taking losses is pointless, and given that there's probably a cost to taking the loss (commission, SEC fee), you'd be losing money by doing so. Also, you won't be able to buy back the loser for 31 days without having the loss postponed due to the wash sale that would result. State tax is another matter, but (going by the table in this article), even using the highest low end tax rate (Tennessee at 6%), the $50 loss would only save you $3, which is probably less than the commission to sell the loser, so again you'd be losing money. And if you're in a state with no state income tax, then the loss wouldn't save you anything on taxes at the state level, but of course you'll still be paying to be able to take the loss. On the high end, you'd be saving 20% federal tax and 13.3% state tax (using the highest high end tax state, California, and ignoring (because I don't know :-) ) whether they tax long-term capital gains at the same rate as regular income or not), you'd be saving $50 * (20% + 13.3%) = $50 * 33.3% = $16.65. So for taxes, you're looking at saving between nothing and $16.65. And then you have to subtract from that the cost to achieve the loss, so even on the high end (which means (assuming a single filer)) you're making >$1 million), you're only saving about $10, and you're probably actually losing money. So I personally don't think taking a $50 loss to try to decrease taxes makes sense. However, if you really meant $500 or $5000, then it might (although if you're in the 10-15% brackets in a no income tax state, even then it wouldn't). So the answer to your final question is, ""It depends."" The only way to say for sure is, based on the country and state you're in, calculate what it will save you (if anything). As a general rule, you want to avoid letting the tax tail wag the dog. That is, your financial goal should be to end up with the most money, not to pay the least taxes. So while looking at the tax consequences of a transaction is a good idea, don't look at just the tax consequences, look at the consequences for your overall net worth." the difference would be taxes...  Lets say you have two lots, one with a 10 dollar gain, and one with a 20 dollar gain.  And lets say you decide to sell one lot this year, and the other lot in 10 years.  AND, lets say that it turns out the stock price is exactly the same in ten years as it is when you sell the first lot. In all likelyhood, you'll have more income, and therefore you are likely to be in a different marginal tax rate.  If you believe that you're more likely to pay more taxes in 10 years, then sell the lot with the higher gain now.  If you believe you're more likely to pay more taxes now, then sell the lot with the lower gain now. "To your first comment: yup. To your second comment, A = L + E. If E goes down, and L goes up, the net effect is 0. Then, if L goes down, and A goes up, the net effect is 0 and we are balanced once again. There is no ""rebalancing"" equity. You just have to make sure that, at the end of your journal entries, the accounting equation holds.  It's a very unintuitive concept to wrap your head around, but spend some time mapping out the flow of various journal entries. Once it clicks, you'll really understand the logic." You need to look at all your investment as a whole. The 401K, IRA, and any taxable account need to be a part of the diversification and re-balancing. The fact you have regular deposits into the 401K needs to also be a part of your strategy.  Regardless of how much specific investments have gone up this year, you need to first determine how you want to be invested in large cap stock, small cap stock, bond, international, emerging markets... Then you need to see where you are today compared to those investment percentages. You then move the money in the retirement accounts to get to your desired percentage. And set the 401K deposits to be consistent with your goals. Many times the deposits are allocated the same way the balances are, but that is more complex if one of the sectors you are investing in exists completely outside the 401K.  When you re-balance in the future you will be selling sectors that grew the most and buying those that grew the least compared to their planned percentages. If all the moves are within the 401K and IRA then capital gains are not a concern. Don't think of the different accounts as separate baskets, but think of them as a whole investment strategy. "There some specific circumstances when you would have a long-term gain. Option 1:  If you meet all of these conditions: Then you've got a long-term gain on the stock.  The premium on the option gets rolled into the capital gain on the stock and is not taxed separately.  From the IRS: If a call you write is exercised and you sell the underlying stock, increase your amount realized on the sale of the stock by the amount you received for the call when figuring your gain or loss. The gain or loss is long term or short term depending on your holding period of the stock. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010630 Option 2: If you didn't hold the underlying and the exercise of the call that you wrote resulted in a short position, you might also be able to get to a long-term gain by buying the underlying while keeping your short position open and then ""crossing"" them to close both positions after one year. (In other words, don't ""buy to cover"" just ""buy"" so that your account shows both a long and a short position in the same security.  Your broker probably allows this, but if not you, could buy in a different account than the one with the short position.)  That would get you to this rule: As a general rule, you determine whether you have short-term or long-term capital gain or loss on a short sale by the amount of time you actually hold the property eventually delivered to the lender to close the short sale. https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010586 Option 1 is probably reasonably common.  Option 2, I would guess, is uncommon and likely not worthwhile. I do not think that the wash sale rules can help string along options from expiration to expiration though.  Option 1 has some elements of what you wrote in italics (I find that paragraph a bit confusing), but the wash sale does not help you out." "RED FLAG. You should not be invested in 1 share. You should buy a diversified ETF which can have fees of 0.06% per year. This has SIGNIFICANTLY less volatility for the same statistical expectation. Left tail risk is MUCH lower (probability of gigantic losses) since losses will tend to cancel out gains in diversified portfolios. Moreover, your view that ""you believe these will continue"" is fallacious. Stocks of developed countries are efficient to the extent that retail investors cannot predict price evolution in the future. Countless academic studies show that individual investors forecast in the incorrect direction on average. I would be quite right to objectively classify you as a incorrect if you continued to hold the philosophy that owning 1 stock instead of the entire market is a superior stategy. ALL the evidence favours holding the market.  In addition, do not invest in active managers. Academic evidence demonstrates that they perform worse than holding a passive market-tracking portfolio after fees, and on average (and plz don't try to select managers that you think can outperform -- you can't do this, even the best in the field can't do this).  Direct answer: It depends on your investment horizon. If you do not need the money until you are 60 then you should invest in very aggressive assets with high expected return and high volatility. These assets SHOULD mainly be stocks (through ETFs or mutual funds) but could also include US-REIT or global-REIT ETFs, private equity and a handful of other asset classes (no gold, please.) ... or perhaps wealth management products which pool many retail investors' funds together and create a diversified portfolio (but I'm unconvinced that their fees are worth the added diversification). If you need the money in 2-3 years time then you should invest in safe assets -- fixed income and term deposits.  Why is investment horizon so important? If you are holding to 60 years old then it doesn't matter if we have a massive financial crisis in 5 years time, since the stock market will rebound (unless it's a nuclear bomb in New York or something) and by the time you are 60 you will be laughing all the way to the bank. Gains on risky assets overtake losses in the long run such that over a 20-30 year horizon they WILL do much better than a deposit account. As you approach 45-50, you should slowly reduce your allocation to risky assets and put it in safe haven assets such as fixed income and cash. This is because your investment horizon is now SHORTER so you need a less risky portfolio so you don't have to keep working until 65/70 if the market tanks just before retirement. VERY IMPORTANT. If you may need the savings to avoid defaulting on your home loan if you lose your job or something, then the above does not apply. Decisions in these context are more vague and ambiguous." I think you need to be very careful here. Covered calls don't reduce risk or increase performance overall. If they did, every investment manager would be using them. In a typical portfolio, over the long term, the gains you give up when your stock goes beyond the strike of your calls will negate the premiums you receive over time. Psychologically, covered calls are appealing because your gains happen over a long period and this is why many people suggest it. But if you believe the Black-Scholes model (used for pricing options) this is what the model predicts over the long term - that you won't do any better than just holding stock (unless you have some edge other traders don't). Now you say you want to reduce diversification and raise your risk. Keeping in mind that there is no free lunch, there are several ways to reduce your risk but they all come at a price. For simplicity, there are three elements to consider - risk, potential gain and cash. These are tradeoffs and you can't simultaneously make them all favorable. You must trade one or more of them to gain in the others. Let's say you wanted to concentrate into a few stocks... how could you counteract the additional risk? 1) Covered calls: very popular strategy usually intended (erroneously) for increasing returns. You get the bonus of cash along with marginally less risk. But you give up a substantial amount of potential return. You won't have blowout returns if you do this. You still face substantial risk. 2) Collar your stock: You sell a covered call while using the cash from the sale to buy puts for protection. You give up potential gains, you're neutral on cash but gain significantly on reducing risk.  3) Use calls as proxy for stock: You don't hold stock but only calls in equivalent delta to the stock you would have held. Substantially lower risk while still having potential gain. Your tradeoff is the cash you have to pay for the calls. When using this, one must be very, very careful not to overleverage.  4) Puts as protection for stocks: This is basically the same as #3 in tradeoffs. You won't overleverage and you also get dividends. But for the most part it's the same. These are the main ways to reduce the risk you gain by concentrating. Options themselves are far broader. But keep in mind that there is no free money. All these techniques involve tradeoffs that you have to be aware of. I think you're misunderstanding how tax brackets work. If you make $1 more and that bumps you into a higher bracket, only THAT particular dollar will be taxed at the higher tax bracket rate... Not your entire income.  Short term capital gains are treated as income.  Long term capital gains have a special tax rate currently. "There are two things going on here, neither of which favors this approach. First, as @JohnFx noted, you should be wary of the sunk-cost fallacy, or throwing good money after bad. You already lost the money you lost, and there's no point in trying to ""win it back"" as opposed to just investing the money you still have as wisely as possible, forgetting your former fortune. Furthermore, the specific strategy you suggest is not a good one. The problem is that you're assuming that, whenever the stock hits $2, it will eventually rebound to $3. While that may often happen, it's far from guaranteed. More specifically, assuming the efficient market hypothesis applies (which it almost certainly does), there are theorems that say you can't increase your expected earning with a strategy like the one you propose: the apparent stability of the steady stream of income is offset by the chance that you lose out if the stock does something you didn't anticipate." If you are comfortable with the risk etc, then the main thing to worry about is diversity.  For some folks, picking stocks is beyond them, or they have no interest in it.  But if it's working for you, and you want to keep doing it, more power to you. If you are comfortable with the risk, you could just as well have ALL your equity position in individual stocks.  I would offer only two pieces of advice in that respect. 1) no more than 4% of your total in any one stock.  That's a good way to force diversity (provided the stocks are not clustered in a very few sectors like say 'financials'), and make yourself take some of the 'winnings off the table' if a stock has done well for you. 2) Pay Strong attention to Taxes! You can't predict most things, but you CAN predict what you'll have to pay in taxes, it's one of the few known quantities.  Be smart and trade so you pay as little in taxes as possible  2A)If you live someplace where taxes on Long term gains are lower than short term (like the USA) then try really really hard to hold 'winners' till they are long term.  Even if the price falls a little, you might be up in the net compared to paying out an extra 10% or more in taxes on your gains.  Obviously there's a balancing act there between when you feel something is 'done' and the time till it's long term.. but if you've held something for 11 months, or 11 months and 2 weeks, odds are you'd be better off to hold till the one year point and then sell it.   2B) Capture Losses when you have them by selling and buying a similar stock for a month or something.  (beware the wash sale rule) to use to offset gains. "You have multiple issues buried within this question. First, we don't know your tax bracket. For my answer, I'll assume 25%. This simply means that in 2016, you'll have a taxable $37,650 or higher.  The interesting thing is that losses and gains are treated differently. A 25%er's long term gain is taxed at 15%, yet losses, up to $3000, can offset ordinary income. This sets the stage for strategic tax loss harvesting. In the linked article, I offered a look at how the strategy would have resulted in the awful 2000-2009 decade producing a slight gain (1%, not great, of course) vs the near 10% loss the S&P suffered over that time. This was by taking losses in down years, and capturing long term gains when positive (and not using a carried loss).  Back to you - a 15%er's long term gain tax is zero. So using a gain to offset a loss makes little sense. Just as creating a loss to offset the gain. The bottom line? Enjoy the loss, up to $3000 against your income, and only take gains when there's no loss. This advice is all superseded by my rule ""Don't let the tax tail wag the investing dog."" For individual stocks, I would never suggest a transaction for tax purposes. You keep good stocks, you sell bad ones. Sell a stock to take a short term loss only to have it recover in the 30 day waiting period just once, and you'll learn that lesson. Learn it here for free, don't make that mistake at your own expense." Coincidentally just read a nice post on this topic: http://thefinancebuff.com/no-tax-advantage-in-rsu.html In short, sell the stock as soon as it vests and treat it as a cash bonus. Assuming you're in the US and the stock is possible to sell (public company, no trading window restrictions, you have no material nonpublic information, etc.)  What do you do with a cash bonus? If you have no savings, an emergency fund would be good, then start on retirement savings perhaps... it sounds a bit like you could use some broad general financial planning info, my favorite book for that is: http://www.amazon.com/Smart-Simple-Financial-Strategies-People/dp/B0013L2ED6 One exception to selling immediately could be if the company stock is hugely undervalued, but it probably isn't, and it's probably too hard to determine. It will definitely be added to your AGI, but not necessarily bump your ordinary income tax bracket. You will have to use the Capital Gains Computation worksheet (that uses the general Tax Computation Worksheet) to figure out your tax liability. You might also be subject to the AMT. See the instructions to form 1040, line 44 (page 38) and line 45. "The way I've implemented essentially ""value averaging"", is to keep a constant ratio between different investment types in my portfolio. Lets say (in a simple example), 25% cash, 25% REIT (real estate), 25% US Stock, 25% Foreign stock. Lets say I deposit a set $1000 per month into this account. If the stock portion goes up, it will look like I need more cash & REIT, so all of that $1000 goes into cash & the REIT portion to get them towards their 25%. I may spend months investing only in cash & the REIT while the stock goes up. Of course if the stock goes down, that $1000 per month goes into the stock accounts. Now you can also balance your account if you'd like, regularly selling stock (or the REIT), and making the account balanced. So if the stock goes down, you'd use the cash & REIT to purchase more stock. If the stock went up, you'd sell the stock, and buy REIT & leave more in cash."