Hi this is tom and in this video i'll help you save yourself from yourself. In other words, i'm going to prevent you from doing stupid. All i need is just your attention. Don't click? Nothing, don't smash! Nothing! Don't subscribe to! Nothing, don't buy nothing! Just listen! Now! This is a very common mistake.

People do every day and it's also a very costly mistake. It costs people a lot of money every single day and in about five minutes. You're gon na be stupid. Proof because you're gon na see how to avoid it as simple as that.

Now, what i'm talking about is adjusting your portfolio and, of course, you don't need me uncle tom to explain to you about the importance of adjusting your portfolio. That's not the purpose of this video. What i want to show you is a very common mistake. People do when they actually adjust, and also a quick, little tip on how to decide which stocks to move and which to keep.

Now. For those of you who are new to this channel, just a quick explanation, adjusting your portfolio just means one simple thing: taking out stocks that you think are not going to do well in the next six months and bringing in stocks that you didn't have earlier that You think are going to outperform the market in the next six months. It's basically like being a general manager in the nfl or in the nba right. You want to decide which players to keep for this season, which players to release and which to trade potentially.

So it's the same thing. This is your roster and you try to optimize it for the next season. So let me give an example from sports right. If you are talking about a team who's running for a championship, they want more, like more veteran guys, more skilled, guys pay them more.

But if you are rebuilding a team, you want younger guys less salaries, guys that are going to optimize in four to five years. Not right now, so it's the same thing with adjusting your portfolio, think of it like a sports franchise and you're the general manager. Now in your general manager position. Basically, you have a lot of responsibilities.

One of them is managing risk. So when you look at your portfolio, let's say that you have portfolio: that's full of growth stocks right technology, growth, a lot of upside in the future right good. I also have the same thing. However, we do know that the storm is coming.

It's inevitable. It's going to come, tapering is going to happen, interest rates will go up, tech stocks will go down, there's going to be a bloodbath and by the way i am holding a lot of cash on the sidelines. Just waiting for this to happen, and i think most reasonable people do the same thing, but this is not the point of this video. So basically what will happen when tapering begins when interest rates go up? Is the discount rate, which is the staple of our dcf system? Discounted cash flow valuations is going to go up because it will go up.

It will go up from 10, let's say in my portfolios to let's say 12 or even let's say from 12 and certain other portfolios to 14, but whatever happens, the increase in interest rates will drive the discount rate up in those dcfs. Now, if you don't know what the dcf is, if you don't know what a discount rate is, don't worry, i'm about to explain it in one sentence. The only thing it means is how much future upside of companies is worth today and it's opposite. The higher the discount rate is the lower the value today of the future upside.

So when dcf discount rates go up, future upside of companies go down in value. Very, very simple, and of course this is what we're about to experience when tapering begins with interest rates. Go up future upside is going to be worth less today, which means a lot of tech. Companies like a palantir, for example, will have less of a valuation today, and you should prepare, because you know you're going to be able to buy these companies cheaper once that happens, and if you're holding on to these sort of companies.

You know that you, maybe you should unload them now, get them later, when it's cheaper. Now, there's an old movie. I forget the name with mel gibson and he was playing like an army captain and they were going to vietnam and he was asking the sergeant like hey. Why don't you have a gun? We need to issue a gun and the surgeon said well by the time.

I'd need a gun, there's going to be plenty of them lying around, which is pretty much a very similar analogy to what we're talking about here. So you do need to readjust your portfolio in the sense like you got to prepare for the interest rates going up. I've did many videos about this. I told you which industries you might borrow companies from which industries are gon na, do well, which companies i've did all that.

This is not the point of this video in this video i'll show you how to do the actual process, because the process can actually cost you a lot of money. So let me give you an example: let's say that right now we have five stocks in our portfolio right, let's do five stocks. This is 2021. This is 2022 right, so this is current.

This is future and right now we have a tesla. We have a palantir right, we have nvidia sorry for my bad english, and this is a three and let's say we have two speculative: let's call it spec with an e, a and spec b speculative, a speculative b speculative only means that the stock is basically not Currently, profitable not currently performing up to its potential that the majority of this talk is actually in the future like a startup or a biotech or a company like check cap, for example, or a company like rtx. A lot of these companies with in the health care industry, but also in fintech in every industry. You have these speculative - plays, for example, sensionics versus dexcom in in the gcm continuous glucose monitoring system, but basically in the diabetes industry.

There's a lot of these. So we have two of these speculative ones and basically three massive companies that are currently cash flow positive. So, even though these companies might be qualified as cash flow, positive volunteer would definitely be the weakness point in this because they have a lot of their upside in the future. So we have here three companies which we identified as companies that we might want to consider.

Taking out right now now, obviously, as you know from my own previous videos - i'm not touching volunteer, but this is my own personal preference. Now you don't have to follow my suit. I'm never selling volunteer well, not never not in the next 10 to 15 years. So i'm not going to be readjusting using volunteer, but again in this example, i'm going to be using it as one of those players that you might want to trade as a portfolio manager.

And now it's a tough decision time because we have to make a decision which stocks to keep which stocks to drop so in this case definitely in various days definitely tesla stays obviously already cash flow positive. I don't think tesla is a speculative player anymore and i think that's it. I think. If i have to be objective about volunteer, i think there would be good opportunities to get volunteer for cheaper in about three to four months, uh, not sure about six months to a year, but after tapering i think volunteer is going to take a little slump.

So you might get it for cheaper again, not going to do it myself, but you're more than welcome to try it again, just my opinion, i'm not a financial advisor. Let me just put it clearly, not a financial advisor right. Sorry, for my english, i don't know why it's not writing. Basically, not a financial advisor, i'm just sharing my opinion might be inaccurate, might be wrong, might be the ramblings of a madman.

You know how the drill goes. So let's say that we want to keep nvidia and tesla in this example. Right so now comes the interesting part, so you're thinking about selling palantir and selling these to spec a spec b speculative place, and now we come to the middle of it. If you lasted this long in the video now you're going to see the mistake, most people do now they'll analyze, which companies to keep which analyze, which companies to basically dump, and they will forget one important thing check this out.

I'm going to start new pages just to show you what i mean so now they will forget one simple thing which is when you bought this talk. Let's say i bought palantir on january 1st 2021 right january, 1st 2021, i acquired volunteer shares in the amount of let's say: 1 million dollars right. Okay and now let me show you a little trick now: i'm thinking about selling palantir what happens if i sell these 1 million shares today, let's say d for dispose. What happens is i have a profit right? I bought it for, let's say, 10 million, because the price was on the ipo.

I think it was 10, so let's say my basis was 10 million dollars. This was my basis. I'm selling it right now for two and a half times 25 million dollars, which is the current market value, roughly question of doing exact numbers. So right now i have taxable income of 15 million dollars.

That's my taxable income 15 million dollars so far, so good bear with me. This is about to get interesting so right now, here's the interesting part. So we have these 15 million dollars and now i want to show you what happens next, so i want to pay taxes on these 15 million as low as possible within the bounds of legal parameters. Right, we don't want to do anything illegal.

We don't want to evade taxes, so we have a 15 million dollar tax liability potentially and now, let's say i'm showing you the date again so how much time has gone by since i acquired this talk until now, 10 months, 10 months. So under a year. If i held this volunteer shares under a year, sorry about that, my bad english is acting up again. So if i help volunteer for under a year, what happens is my tax bill is going to be very, very high? It's going to be short term capital gains, s, t c, g, short term capital gains, which means it's anywhere from let's say: 25 up to 37 percent, regular income 37.

That's the top federal rate. I think you can pay and at these levels is going to be 37. Of course, this is a progressive system, not 37 on everything, but for the most part, you'll pay 37. Now, some of you may say well tom, the the capital gains tax in according to the federal irc internal revenue code is 15 right.

So how come we're paying 37 is because you held it under a year dummy if you hold a certain stock under a year. You pay good income tax, not bad capital gains tax, which makes the government and the irs very happy to charge those taxes. Now here's the thing: if you held this thing for two more months, you have a one year holding period and then your tax rate goes down from 37 to you know how much 15 15! If you just wait two more months, you see the difference. It's a 27 difference on your tax bill.

These are huge dollars, it's a lot of money, so you don't want to do that. So the question you have to ask yourself when you analyze, which stocks to keep and which stocks to release from your stable or your roster, whatever you call it, you have to ask yourself the question. Well, i like volunteer, i like spec a i'll expect b. So, let's decide which ones i want to sell, but before i pull the trigger, i want to make sure that these are not short term capital gains, because whether you have a good candidate for disposability or not, you got to ask yourself the question: when did i Buy this stock did i hold it more than a year or not, because if you held it under a year, your tax bill is going to be 25 higher and that might eat away at your profit at your delta or whatever you're about to make from this Adjustment, so that adjustment becomes much less attractive, or rather, i should say less attractive if you pull the trigger under year.

So the first thing you check before you start to analyze, which companies you want to get rid of is the purchase date purchase purchase, can't write in english. I don't know russia next time purchase date. That's the key metric! You do that before you check, which ones you want to get rid of, because otherwise and people find out that post fact them they found out, usually when they pay taxes that they got screwed, because they were so smart. But they forgot about the taxes.

Don't be that guy now just a little bonus if you lasted this long in the video, i do appreciate it and by the way we just hit 250 000 subscribers on our channel, which is incredible. Thank you all, and if you stayed this long, i'm assuming you're a subscriber, so thank you uh one little tip when you do this kind of readjustment just make sure you do something very simple. What you want to do is basically prepare this list in your head and in this list you got to make sure to basically say to yourself. Okay, i have five companies a b c d and e right, the same thing as a general manager does in the beginning of a season, and you got to say ranking system from one to five, which is my favorite, which is my second favorite.

My third favorite, my fourth favorite, my least favorite, and then you say: okay, i want to keep these these. I don't want to touch. These are my lebron james right. I can trade these.

These are my kuzmas. This is my caldwell popes. These are the players. I can trade, but these ones i'm keeping and this one for the right price.

I might keep it, but basically you do this analysis. You do the ranking system on the piece of pen and paper and you write it down or computer whatever, and you see the ranking, because if you want to readjust, you got to make sure to decide which ones are worth. What in your system in your head. So one to five one to ten: whatever you have in your portfolio and this basically is going to save you a lot of money, so i hope this was helpful.

Thank you so much for lasting this long, a huge shout out to the channel members to the patrons you guys are awesome. Thank you so much. I love you all i'll see you tomorrow.