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Technology Stocks : Dell Technologies Inc.

DELL 119.41

-2.7%

3:59 PM EST

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To: TREND1 who wrote (115022)	4/8/1999 10:36:00 AM
From: Chuzzlewit	Read Replies (1) of 176387

Larry, I'll bet that in actuality HAL is inferior to buy and hold for the following reasons: 1. Taxes must be paid on capital gains. This means that even if a trade is more profitable in theory, the reduction in the investment due to taxes paid on a pay as you go basis significantly reduces yields. 2. Brokerage fees must be paid. Does HAL pay commissions? 3. People often neglect the fact that you buy at the asked price and sell at the bid. Does HAL recognize these differentials? Now look at just one real world phenomenon: taxes. Let's assume a Dell-like stock growing at 50% per annum over 5 years. Assuming a 28% tax rate (it is actually 18%, but I'll stack the cards a bit in your favor here to make a point) the after tax yield for the buy and holder is 41.9% p.a. The trader must generate 58.2% pre tax just to match the buy and holder. Now suppose we use the 18% LT capital gains rate. Now the buy and holder has an after tax rate of 45%, and the trader needs to do 62.5% just to match! Now add in the other issues like fees and bid/ask spreads and you'll see the gap widen even further. TTFN, CTC

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