stock question - would you keep buying?

[kranky]

I would say hold it for 1 yr min. Paying 15% vs 30% for tax is a big jump. $300 *.05 = $15
$15*.7= $10.50
$15*.85= $12.75

Personally I would just hold it and collect the dividend. No reason to buy and sell for $15/month. If you look at the 5 year charts, there has been some growth with IBM. They also grow the dividends each year, so the yield you get improves for your current holdings. Might see more when the economy picks up. Look to sell at the next peak.

Good point on the cap gains. Hold for a year is a good idea. But I don't agree with trying to time the peak. I don't like having too much long-term money in one stock. Even if it crawls upwards slightly, there could be more to gain from index funds (and the S&P has trounced IBM since 2009 even though IBM has moved up solidly).

 

[Juked07]

I think a lot of the above was quite reasonable already, but just to weigh in a bit more:

You should definitely buy as much of the stock at a 5% discount as possible given your tolerance for risk. As mentioned, concentrating a lot of your holdings in a single equity is antidiversifying, and increases the variance of your returns when compared with a diversified basket, but 5% alpha is clearly worth it. Outperforming the market by 5% per annum is a ridiculous rate, and you'd be crazy not to try to take full advantage of the opportunity. For any reasonable market return r and a long enough investment horizon t, you'll find that (1 + r + 0.05) ^ t is greater than (1 + r) ^ t by so much that you can't possibly turn it down.

I'm guessing there's some holding period for which you are either required or at least tax/monetarily incentivized not to sell it. That's fine as long as you can bear the risk. If you start to find yourself holding such a large position in this stock that you can't tolerate the riskiness of the position, you can protect it by buying downside puts. This will reduce your profits (you should expect to pay trading costs and give up some expectancy crossing spreads when you purchase options), but it will limit your risk in a predictable and reliable way.