What Happens After You Sell 100 Shares of General Electric Common Stock?

Selling shares of a company, such as General Electric (GE), is a significant financial action that can have various implications. For a comprehensive understanding, we’ll break down the entire post-sale scenario into clear stages: the immediate transaction, financial implications, tax considerations, and subsequent portfolio management. Let’s dive in quickly to understand what happens after you sell those 100 shares of General Electric common stock.

Immediate Transaction

Execution of Trade

When you place a sell order for 100 shares of GE, the order is executed through your brokerage firm. Depending on the order type (market, limit, stop-loss), the timing and price at which the trade gets executed can vary. For instance, a market order will execute immediately at the current market price, while a limit order will only fill at your specified price or better.

Notification

Once the trade is executed, you will receive a notification from your brokerage, typically via email. This confirmation will include the number of shares sold, the sale price, and the total proceeds from the sale.

Financial Implications

Cash Settlement

The proceeds from the sale will first appear as a pending transaction in your brokerage account. The actual cash will usually settle in your account within two business days, a period known in trading as T+2. For example, if you sell your shares on a Monday, you should see the cash settled in your account by Wednesday.

Brokerage Fees

Be mindful of any brokerage fees that apply to the sale. Most online brokers offer low to zero-commission trades, but some traditional brokerages may still charge a fee per transaction. Ensure you understand these costs as they will reduce your net proceeds.

Tax Considerations

Capital Gains Tax

Selling shares triggers a realization event, meaning any gains or losses become realized and are subject to taxation. If you sell the GE shares at a price higher than your purchase price, you’ve realized a capital gain. Conversely, if the shares sell for less than the purchase price, you’ve realized a capital loss.

Short-Term vs. Long-Term Capital Gains

The tax rate on your capital gains depends on how long you held the shares. If you held the shares for more than one year, any gains are considered long-term and generally subject to lower tax rates. If you held them for one year or less, the gains are considered short-term and are taxed at your regular income tax rate.

Reporting on Tax Returns

At the end of the tax year, your brokerage will provide you with Form 1099-B, summarizing your trades. You will need this information to report capital gains or losses on your tax return.

Subsequent Portfolio Management

Rebalancing

Selling 100 shares affects your portfolio’s asset allocation. You may need to rebalance your portfolio to stay aligned with your long-term investment strategy. For example, if selling GE stocks increases your cash position, you might invest that cash into other stocks, bonds, or asset classes according to your asset allocation plan.

Strategic Considerations

Think about why you sold the shares in the first place. Was it to take profits, cut losses, or reallocate assets? Reflecting on your investment strategy will help inform your next steps, whether that means investing in another stock, saving for a future opportunity, or diversifying into different asset classes.

Reinvestment

With the cash from the sale, you may choose to reinvest in other investment opportunities. For long-term growth, consider diversified index funds or ETFs. If you have specific stocks in mind, ensure they align with your risk tolerance and financial goals.

Conclusion

Selling 100 shares of General Electric common stock initiates a series of financial and strategic actions. From the immediate execution and notification to understanding the tax implications and potential rebalancing of your portfolio, every step requires careful consideration. Being well-informed allows you to make decisions that support your long-term financial goals. Always consult with a financial advisor or tax professional to get tailored advice suited to your unique situation.