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Short term trading generates income which is taxed at ordinary income rates.
When you factor in state taxes, the tax bite can be well in excess of 40%.
With short term trading, if you are successful, you are pretty much taxed on
an annual basis. If you are wrong, there are limits on using the losses for
tax purposes.
Long term investors are accumulaters of wealth. The maximum tax rate is 20%
(Federal) and this tax is not paid until the sale of the asset. It has been
my experience that long term investors accumulate wealth faster than traders.
Now there are exceptions to every rule and sometimes trading wins.
I do both, but the big bulk of my assets are long term. Any trading is for
fun and games....entertainment, so to speak. When one experiences the full
cycle of long term investing, it is scary what one can accumulate. My
recommendation would be to invest 70-90% in a long term program and then play
games with the balance. If you should be fortunate enough to trade
successfully, then pay the taxes and smile.
Jerry
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