Continuing from last post, you may be at the stage where you have purchased some stock and are debating whether or not you should sell.
Before you do, take a look at these important factors:
How long have you owned the stock? The reason this matters is that when you sell the stock (and make money on it), it’s considered to be a form of income. However, with stock and mutual funds, this is called a capital gains tax. If you’ve held a stock/mutual fund for longer than a year, you pay a long-term capital gains tax. Less than a year? It’s short-term. The difference between the two is quite a bit. Short-term tax is 15% while long-term is whatever your income tax rate is at that point. This makes a big difference on how much you can actually make on the sale.
How much commission do you pay? Regardless of how you buy/sell stock, you have to pay a licensed broker to do it (unless you happen to be one, in which case you should know all this!) This shouldn’t be a great deal of money (probably $5-$20 per transaction) but make sure the dollar amount your gaining on the sale offsets the commission. Making $50 but losing $20 in commission (plus the taxes) isn’t a smart way to invest!
How badly do you need the money? The stock market is finicky. It can go up (sometimes way up) and then drop back down. If you are in your teens or 20′s and aren’t planning a major purchase any time soon (i.e., a house) then let the cash ride it out. Over the long term, stocks generally (operative word) have a rate of return higher than savings accounts or CDs.
Keep your wits about you with the stock market. Don’t go crazy, buy what you know and what’s been around, and you should do just fine!
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