What do you mean by “volatile?”
At the time of writing (mid-January 2025), AbbVie’s stock price was around $175/share. Through 2024, the share price was between $155 and $203/share. If you had 1,000 shares of AbbVie from your accumulated RSUs, this value would have fluctuated between $155,000 and $203,000 – a difference of $48,000 or 30%.
A 30% swing in 12 months is volatile!
What am I supposed to do about this?
When you have stock, your only options are selling it or keeping it.
Deciding what to do with the stock depends on your financial goals. If you're building a diversified portfolio for the long term, the best recommendation is to sell the stock and purchase a diversified investment, like the S&P 500.
But let's say you want to hold the stock as part of your strategy. Then, you must ignore the stock price volatility and trust that the stock will continue to increase in value over time. In these situations, I encourage people to have an exit plan. For example, this could be a target stock price at which you sell the majority (or all) of your stock when it reaches that price. Or it could be on a timeline - you sell 25% of your holdings in AbbVie every six months, knowing that if you're still working at the company, your holdings will be replenished with your vesting RSUs.
If I sell, what am I supposed to invest in?
Investing for the long term is relatively simple once you understand the best strategy for you. The first part is to know how much risk you're willing to take. An easy answer is that the younger you are, the more risk you can afford. Alternatively, the closer you are to retirement, the less aggressive you should be. Part of this can be figured out using a risk tolerance questionnaire found online, which will give you an idea of an appropriate strategy for you and your situation.
Once you've determined this, you can start building a low-cost, diversified portfolio of index funds. These funds should be spread across the United States and other world markets. Depending on how conservative your portfolio is, you'll include bonds in the United States and abroad.
The final piece of this puzzle is deciding what investments go into which accounts. If all your ABV stock is from RSUs and will go into a taxable investment account, you'll want investments that do not generate a high tax bill and have a low turnover, meaning the holdings inside the investments do not change frequently. If you're selling AbbVie stock in a retirement account like an IRA, add your bond holdings here to maximize tax efficiency.
My shares have increased in value; won’t that trigger a tax bill if I sell?
Any increase in value is going to trigger a tax bill. However, you shouldn't let any tax bill determine your investment approach. You should consider this a positive - paying taxes on your investments means they've grown and increased in value.
When you sell your AbbVie stock, you want to understand what taxes will be generated. If you held a share of AbbVie for less than one year, any taxes generated will be subject to short-term capital gains taxes, which are assessed at your current income rates. If you earn a substantial income from AbbVie and sell this stock, you may be paying a 30%+ Federal tax rate.
The optimal scenario is you've held your AbbVie stock for longer than one year. Crossing this one-year threshold will subject your gain to long-term capital gains rates. These rates are 0%, 15%, and 20%, depending on your income. When you sell your AbbVie stock, regardless of the type of tax it generates, you should withhold some of the proceeds to send as an estimated tax payment to cover your tax bill at the end of the year. The remainder of your proceeds can then be reinvested into something else.
I’ll get more RSUs this Spring; what do I do then?
From now on, take this approach: If you're not financially independent, you should sell every AbbVie share that comes to you when it vests.
If you are financially independent - meaning you could retire tomorrow and live off your investments and other assets - you can hold the stock until it reaches 10% of your investment portfolio.