Stock Market Investment – Long Term or Short Term?

Having a pre-disposed long-term buy and hold stock may be a very expensive mentality. Long-term market trends have risen, but in volatile stock markets long-term returns tend to take risks rather than as large as many short-term gains. Long-term stock market investors risk and return rate greatly increased. People think that tax consequences are the reason they hold. This argument has no weight. Some people find it hard to shake off old habits and think about the stock market. Those who do not want to learn from the collapse of the market are doomed to repeat this lesson.

A few years ago, investors were told that buying and holding long-term investors was a wise move because the long-term trend of the market is on the rise. If you take any other approach, you'd better be a speculator and the worst gambler. Brokers and mutual fund managers are the main supporters of this investment philosophy. The media also joined the chorus, which became part of the "accepted" market. In this respect, the investor's mind loses its elasticity. Ignore the fact that selling stocks that have entered a high risk phase actually reduces the risk of the portfolio, whether held for a year or not. It is important that we have a clear understanding of the main issues related to investor holdings.

New fluctuations in the market may stay here. The current reality of the market is that stocks tend to experience multiple price fluctuations in a given year, where the magnitude of these short-term fluctuations is usually equal to or greater than their one-year price fluctuation. Even stocks that are losing money within a year can be very profitable several times a year. Unless the long-term expected return is much greater than the average return on equity investment, the stock price rises only 20% within 2 months, which is a high-risk gamble once its chart growth rate begins to break down. The probability is that holding such stocks to meet the one-year long-term tax requirements will cost too much. When the stock rises rapidly, they will usually greatly "correct" once they fall, once they start to collapse. It's like a crowded auditorium, someone shouting, "Fire! Everyone wants to be." Potential buyers then become waiters outside the auditorium waiting to come in. When they see all the people panic, they naturally decide to wait,

Investors' Tax Rates due to Long-term Holding Periods

The potential reduction is not enough to cover the risk of large losses.If you have 20% of the proceeds, why not take it rather than lose it? In less than a year to sell under these conditions is very easy to prove.Although the figures may be based on Your files, even the highest tax rates, will still make more sense for sales in this case (the tax rate may vary when you read this but the points are still the same.) For example, even if your Revenue is $ 500,000 per year and you do not have to deduct that 3 short-term gains of $ 18,000 or $ 27,000 will net you more tax than a long-term benefit of $ 40,000 15%, no matter how you file.That is, Of short-term gains in the market may be more profitable than hanging on the stock in the hope of greater long-term gains.In addition, in the long-term benefits can not be obtained environment (and the benefits may have been achieved by the market to attract

Stocks do not move in a linear fashion. Our traders find that if the stock rises 20% within 5 months, within 10 months it does not make sense for the stock to break up. It is likely to rise 40% in 10 months, it is more likely in 10 months rose 8%, or even down 10% .Therefore, the key to higher net income investment decision is not based on the nature of our tax law, but based on the risk of reward If all things are equal, in general, long-term retention will be better.It is obvious that this is our own preference.However, all things are rarely equal, the stock model will collapse when the stock It is more important to keep capital at a lower rate than to get a lower tax rate.That people who invest by signaling the tax code rather than through the stock itself usually end up paying less tax because they do not make money.They get their long-term deductions (19459003)

The fact is that no one can say with certainty that a given portfolio (or a portfolio) is not a good place to make money, (Even if they are blue chips) .Of course, we all like to buy only stable climbers, but they remain in the portfolio for one year or longer to obtain long-term capital gains tax incentives Five years would be better because it would lower transaction costs.But the market and your stock do not care about your needs, needs or tax status. In addition, transaction costs can be minimized. For example, in a well-known discount brokerage firm, you can sell a value of $ 50,000 positions, only $ 7. If the stock price is $ 40 per share, then the brokerage commission for this transaction will be slightly more than half a cent per share. This cost is negligible relative to the possible loss of keeping the loser.

If we buy a stock that starts to collapse shortly after we buy, we have to admit that we were wrong or accident happened. Stocks and / or companies must first meet certain conditions and requirements in order to purchase. If these conditions no longer exist, we must sell them. Our primary consideration in an unstable environment must be to preserve the asset even if we sell the stock the next day after we buy it. On the other hand, if we achieve a 20% return over 6 months, the stock remains strong and still near support, and we will continue to hold because we are not being given a reason to sell. The same is true if we hold stock for five years and our earnings are greater. The stock itself, or the market, will tell us when we have to sell. Volatility-adjusted stops are very useful in this regard.

There is no way to know in advance how long it should be held. We should not invest in what we think should be based on, but based on what. Although the 1-year minimum holding period is desirable for tax considerations, it is meaningless and arbitrary in the context of market behavior. In fact, our rigidity along these lines of thought can be very expensive. Of course, we want to hold stocks as much as possible, but the speed of growth and risk should not be overlooked. Stocks that have proven themselves unable to break through the resistance at the head no longer have growth potential, and the stocks held on hold are at risk of loss (the risk / reward rate has changed). In fact, the risk of loss will increase, as others conclude that the stock will not go higher.

Difficult to abandon the old investment philosophy. One thing to note is that a particular stock gives a signal to sell and the other moves away from the old way of thinking in order to act on the signal. This takes time to be internalized to the point where it is automatic. A good, clear strategy can be an effective trainer in this area. After all, lessons can be learned from every crash of stock and every market crash. Investors must learn to allow stocks and markets to give their signals. When these signals are given … we must learn to listen.

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