See Greater Profits By Reducing Your Investment Taxes: Part 6

Now we’re going to talk about five strategies for saving money on investment taxes. These strategies should really help you in the long run, because whenever you can save money on the taxes, it’s like your investments are returning greater profits to you. 

Strategy #1: Don’t Time the Market, and Avoid Emotional Action.

Buying and selling stocks is a matter of opinion. You’ll find people with different viewpoints, but the general rule of thumb is the less you trade the better it will be for your taxes and fees.

Tips to keep in mind regarding the stock market:

• When you’re investing in the stock market, it’s very tempting to follow the news each day.

• Some investors are always looking for the next hot pick, and many will buy and sell stocks each day. But the more you do that, the more it will cost you.

• Remember, if you hold stocks for over a year, you pay fewer taxes on your gains. If you’re selling your stocks every week, they’re all going to be short term, which means your tax rates will be higher.

• In addition, every time you buy or sell an investment, you have to pay a brokerage fee. Those fees start to add up over time, and they’ll begin to eat away at your annual returns.

For many investors, it makes sense for them to build their portfolio and then leave it alone for six months to a year without looking at it. That strategy will keep your fees low.

It may be difficult to keep your emotions out of investing. But if you can, here’s how to maximize your investments:

• The dream way to make money in the market is to be able to buy low and sell high. Obviously, that would make you the most profit.

• But what often happens is that we tend to do the opposite. When the market is crashing, there’s panic. That’s when people pull their money out of investments.

• The best way to take the emotion out of investing is to try not to follow it at all. One way to handle things is to pay the same amount each month, no matter what, and don’t look at your balance. This way, you’re still buying whether the market is going up or down.

When the market is booming, it’s easy to feel good and confident about your investments. That’s when it’s most expensive and people buy. However, you want to do the opposite and buy when the prices are low. This is difficult to do because you might be scared to take this type of risk.

Let’s say you’ve got your investment goal and you know what you’re supposed to buy. Now what? Just follow it loosely and try not to get caught up in the day to day news.

This investment strategy may seem kind of a boring, but it’s the one that works best long term. If you just buy and hold your stocks for the long term, you’ll make money over time. The stock market average is between 8 and 10 percent per year.

By using this strategy, you’ll probably never get a huge pick which makes a ton of money. However, you’ll be in much better shape than the person who chips away at their savings year after year with extra fees and taxes.

“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.”

~William Feather

Thanks for reading! Stay tuned for more investment tax tips.