Filed under: Competitive strategy, Getting started, Comfort Zone Investing

Ted Allrich is the founder of The Online Investor and author of the just released book: Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he’ll offer advice to investors who are just getting started.

I recently had lunch with a very smart businessman. He was sharing some of his investing thoughts when he said, “I hate to pay taxes on capital gains. But I can’t tell you how many times I’ve waited for my stock to reach long term capital gains status, and before it does, it tanks and all my profits are gone.” I suggested he was letting the tail wag the dog.

Taxes are awful. They hurt every time you write the check. But they’re as much a part of investing as dividends or stock splits or losses. They’re a fact of life, you know, like death. There’s no way around them in the stock market as there is in the commercial real estate market where you can do a 1041 exchange and postpone taxes. When you sell a stock for a profit, you have to pay taxes on the gain. If you hold it less than a year, you’ll pay at your income tax rate. If you hold a stock longer than a year and have a gain, you’ll pay 24% on the gain. The only relief is if you have losses in other stocks you sell or have sold to deduct from those gains.

Continue reading Comfort Zone Investing: Capital gains are the dog, taxes are the tail

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This entry was posted on Saturday, September 29th, 2007 at 3:04 pm and is filed under Stocks Money News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.