[Disclaimer: These are my own views, not financial advice. Use at your own risk.]

Over the course of a career, many folks find themselves with an oversized holding of a particular stock (often their company’s). While this poses several issues, this post focuses on one: deciding which lots to sell when it’s time to trim your position.

First, a few quick terms:

• Costs-basis is the market price of the stock when it was acquired. It’s also the price used to determine your profit (capital gain) or loss (capital loss) when you sell.
• A lot is a batch of the same stock that you acquired at the same time and for the same cost-basis.

So now you want to sell some of that stock – the question becomes, which lots do you sell?

In my early days I had some… creative ideas:

• Sell the lots I made the most on (lowest cost basis) to “lock in” those profits!
• Sell the lots with a cost basis closest to the current market price, to minimize gain (and taxes) or loss.
• Sell the most recently acquired lot to keep it simple.

You guessed it – for most people these are all probably wrong.

The correct answer is surprisingly simple: sell from the lots with the highest cost basis.

If that means taking a loss, do it (and use that loss to offset future gains). If it means taking a gain, that gain will be as small as possible.

Why? Taxes. You pay capital gains tax on the difference between the cost basis and the sale price – your profit – so the goal is to minimize that difference. Taking a loss can also be strategic. For example, suppose you acquired 100 shares at $50 (Lot A), another 100 at $75 (Lot B), and the stock now trades at $80. Selling the $75 lot (Lot B) first means recognizing only a $5 gain per share instead of $30. Later, that loss or smaller gain can help neutralize taxes on future profits (subject to rules like the wash sale exception).

The key driver behind my early thinking was emotion – “I need to make a profit!” or “I need to avoid losses!” Once you take emotion out of the equation, the math becomes clear: you’re optimizing for after‑tax value, not psychological comfort.

Think rationally. Sell high – it isn’t about pride, it’s about strategy.

Good luck!

-Gary