How Investment Income or Loss Affects Taxes？

As you consider how to respond to a market sell-off, keep in mind that there are other consequences to selling your investment。The IRS treats short-term gains and losses (i.e., returns on investments held for less than one year) as regular income。Depending on your tax bracket, this may need to be taken into account when analyzing your trading activity。For example, if your taxable income is between $39,476 and $84,200, you may face a short-term capital gains tax of 22%.。

Any profit may be considered a "long-term capital gain" if you hold your holdings for more than one year.。For these profits, taxes vary based on your total income, but the long-term capital gains tax is capped at 20%。Most investors enjoy a long-term capital gains tax rate of just 15%, according to the IRS.。Most financial advisors do not recommend letting taxes determine your investment choices, but instead consider the impact that excessive short-term trading may have on your overall investment strategy and objectives.。

Risk of active participation in the market

During an economic downturn, the market was unusually volatile, with some days up or down more than 9%。While it may be tempting to try to buy on the downside and sell after the upside, the strategy rarely wins, and sentiment in particular may play a decisive role.。

No one can say whether the peak or trough will be greater。As a result, in addition to subjecting themselves to potentially higher tax rates, it may be easy for people who trade frequently to miss out on a potential long-term recovery.。

Given the dire attitudes that currently prevail - hedge fund manager Bill Ackman says "hell is coming" - it seems everyone is begging for some good news, but trying to time or forecast volatile markets is largely speculative.。

Prices are always changing

This is another factor to consider when investing.。For stocks, prices are always changing, and these fluctuations are the most important。You can see the market rate for a given security every minute or even every second。But the same can be said for other investments。For example, the value of your car or home may also change, with real estate companies and car dealers determining monthly increases or decreases。

That is, unless you are a real estate speculator or a car collector, the temporary prices may not matter, they are exactly what the market claims your investment is worth at various points in time。It only starts to matter when you want to sell。You can decide for yourself whether this price is reasonable or not, and if it is unreasonable, you have every right to postpone the transaction。

By narrowing your scope and developing a long-term strategy, you can often enhance your financial acumen, maintain a vision, and support your goals。