Savvy investors know well that it's not just what you make that counts, but what you keep after the tax man takes his bite. That's become increasingly difficult, particularly for active traders, given the gaping divide between the top tax rate on long-term capital gains — just 20 percent — and the top federal income tax rate of 39.6 percent charged on interest, dividends and short-term capital gains. Toss in the dreaded Alternative Minimum Tax, and your real after-tax returns could...
Is it possible to predict how a security or group of securities will perform? There are no foolproof theories, but that hasn't kept investors and money managers from trying.Investors have traditionally used security analysis — the painstaking study of individual securities and companies — to gauge the relative attractiveness of various alternatives. But over the past four decades, the newer technique of Modern Portfolio Theory has emerged as a valuable tool for measuring and comparing...
Readers share a few more of the strategies that have cost them dearly. Learn the dangers of betting it all on the next big thing, locking in losses too fast and heeding the call of margin buying.A couple of weeks ago, I wrote a column about "Blond," a young investor with a plan to make a quick buck in the market. His notion was to invest $1,000, earn 10% in a week, tuck the 10% away, reinvest the thousand bucks, make another 10% the second week and so on. At the end of the year, he'd...
Suppose you own two stocks — one that has risen in value and another that has done nothing but decline in price. Which one are you more likely to sell?You may be surprised to learn that many investors choose to let go of stellar performers rather than stocks that have lost money.1 Why? As long as they avoid selling a loser, they can rationalize that it will recover someday, thus vindicating the original decision to buy.2 When they sell, on the other hand, the conclusion that they made...
Getting out of a trade is a core aspect of being a successful trader. Those who are not successful are those who get out too early of a winning trade and stay in a losing trade too long. So how do we manage when we get out of a trade?One key component is managing fear and greed. Fear will cause you to get out too early and greed will cause you to stay in too long. Having your exit strategy in place before you even enter the trade helps take the emotion out of getting out. Being able to operate...
Nowadays, many conversations about what is better: the stock market or Forex? What attracts investors in both markets? What are the differences and similarities between these two types of speculation?Let's start with the fact that the stock market is more suitable for investment, while Forex - it's still speculation in the currency for profit. But they have the same goal - making profit.RTS is a loan market, which is trading securities - stocks, bonds, stocks, and trade payment instruments...
Appropriate asset allocation...effective diversification...suitable fund selections. These are some of the fundamental goals that every investor should desire in a mutual fund portfolio. Whether an investor is in various stages of asset accumulation or distribution, these goals are necessary for mutual fund portfolios to be successful. However, an investor can encounter many roadblocks or pitfalls in the quest to attain these goals. The remainder of this article examines three of the most common...
Has this happened to you? You are a very unusual person if you are not disturbed when your stocks are worth less than you paid for them shortly after purchase.The purpose of this article is to help you better understand the significance of your "paper loss". If you sell your holdings, you will have an actual loss but if your portfolio is worth less than you paid for it and you do not sell; you are said to have a paper loss.In order to aid our discussion, I am going to create a fictitious...
"Buying on dips" is the notion that it's possible to profit from short-term gyrations in the market -- as long as you are a long-term investor and are willing to buy and hold investments for a period of years. Buying on the dips is best suited for investors with a long-term perspective, since we know that the stock market always recovers from dips in the long-term. In the short-term, though, no one can predict the direction of the market.Here's an example. Let's say you...
How would you like to earn a "whopping" 20 percent return on a stake in an eel farm? Or maybe you'd like your principal guaranteed and make a 15 percent annual return to help manufacture coconut chips for an ironclad contract with a major supermarket chain? Perhaps you see a big future in Internet gambling, or portable nuclear reactors, or telephone lotteries, or ostrich farms?If those investments aren't up your alley, how about this one: a "prime bank security"...
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