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Strategies & Market Trends : A.I.M Users Group Bulletin Board
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To: The Philosopher who wrote (7019)3/9/1999 4:32:00 PM
From: OldAIMGuy  Read Replies (2) of 18928
 
Hi CH, Yes, Mr. L skims over both ideas. He feels that the Cash Reserve interest rate will usually cover trading costs. In these days of discount brokers, I'd say he's right.

As far as taxes go, if you set yourself up to do your stock trades on a FIFO basis and pick stocks you want to own for 3-5 years, then after the initial year's ownership, most trades will be Long Term in tax nature. Mr. L's book gives the impression that we trade much more often than is reality. Count on about 4-6 trades per year on average per equity. This could be all buys, all sells, or some combination. There are exceptional stocks and circumstances that will have you trade more frequently.

So, if you had 5 Sell trades in a year's time and each one represented about 5% of your total holding, then you would have sold about 25% of your position. If all ST gains, it's still on only 1/4 of your total holding. It's more important to understand that AIM is a great Purchasing Agent. It is going to ask you to wait quite a while from your last Sell before you make your first buy-back. The discount from the sell to the buy should be plenty large enough that you'll be able to pay taxes and commissions and still buy as many shares back as you sold with the net remaining.

Take a look at the FAQ's at execpc.com and look for the question on tax consequences of trading. This should help.

Best regards and keep those questions coming!,
Tom
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