SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Technology Stocks : Ascend Communications (ASND)
ASND 215.19+3.0%Jan 13 3:59 PM EST
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Pullin-GS who wrote (7107)7/21/1997 12:44:00 PM
From: Chuzzlewit   of 61433
 
Paul, let me give you a concrete example. Let's compare a buy and hold strategy that yields 15% per annum after expenses (2 brokerage fees) to a trading strategy that also yields 15% after brokerage fees (multiple trades each year) so that I can demonstrate the tax effect. Let's further assume that each year the trading strategy yielded 15% after expenses and the trading portfolio was completely liquidated at the end of the each year. After a five year period, the effective tax rate reduces the yield per annum on the trading strategy to 10.8% compared to the yield on the buy and hold strategy to 11.6%. This gap increases the longer the security is held and the greater the gain. The gap is further increased at such time that a reduction in long term capital gains taxes is enacted. The reason behind the gap is simple -- the government is extending you a risk-free loan ( if you lose the money you don't need to repay it!) at 0 interest.

Transaction costs can also eat up a lot of the trading gains, but there is no way to quantitate this since it will depend on the size of the portfolio and the number of trades each year.

I hope this analysis helps. There is also a considerable body of evidence from academe that shows that T/A has no predictive value.

Regards, and good luck

Paul
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2026 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News