JP,
>>> The consideration of the tax concequences in trading decesions is not recomeded. It would indicate that you are focusing a point of lessor importance than the price and current direction of the stock. <<<
It would seem to me that a prudent investor would consider all aspects of trading, in general, prior to changing a position. It isn't that you are focusing on a 'lessor' point so much as being aware of what the consequences are. While a 'stock broker' cannot take that into consideration, the individual investor can. If you are in a stock at $1, which now trades at $101, to trade and 'catch' the ~20 dip makes no sense.
For example, if you sell 1K shares at $101, you have a cost basis of $100K ($101-$1). The long term tax 'bite' ( is it 20% or 28% ) is $20K (let's say), so you net out $80K. Now in order for the 'unprotected' investor to 'break even', the stock has to drop to $80/share (excluding commissions). You really can't make money in this scenario.
Now if you are 'protected' in an IRA of some type, that same $101K trade makes 'money' on a $5 'dip'. Sell 1K @ $101 = $101K - $5 dip to $96, buy 1052 shares, net gain 52 shares. If the stock 'dips' to $90, you will purchase 1122 shares, a gain of 122 shares. Should the stock fall to the point that the taxable investor 'breaks' even ($80), the 'protected' investor gets 1262 shares, a gain of 26.2%.
Kind of like 'day trading'!
IMHO - the investors on this thread certainly are aware of this, as I am sure you are too.
Regards,
Ken |
