Hello and welcome to our community!

[blackzimbo]

My name is Paa and am still reading the book . I am still figuring out the easiest site to gather all the information . This is is very helpful .Thank you all.

[yostyid]

I like virtualstockexchange.com . You can setup a free profile and go from there. pretty easy to use.

[yostyid]

joshuat...I try to do my trading in roth accts to avoid the tax issues you bring up. But even if you are trading in a taxable acct, I am not sure where you get the 40%? I might be mistaken but my understanding is that (at least till 2010) short term cap gains were taxed at your marginal rate.

I agree that taxes will bite, but I am not sure if its that hard. What am I missing on the 40%?

[rharmelink]

See:

http://www.roicommunity.com/forum/ro...ing-tools.html

[Gunnski]

Take a look at Marketocracy. Take it for a test driver.

[joshuat]

Originally Posted by yostyid

joshuat...I try to do my trading in roth accts to avoid the tax issues you bring up. But even if you are trading in a taxable acct, I am not sure where you get the 40%? I might be mistaken but my understanding is that (at least till 2010) short term cap gains were taxed at your marginal rate.

I agree that taxes will bite, but I am not sure if its that hard. What am I missing on the 40%?

Short term gains are taxed as ordinary income.

Capital gains tax rates - Tax Q and A
The SmartMoney.com Capital-Gains Guide (Tax Guide: Personal Finance) | SmartMoney.com
Invest FAQ: Tax Code: Capital Gains Tax Rates

40% I just picked as a nice round number - it depends on your tax bracket and your state laws. Clearly you can be under 40%.

My claim is not that one should always hold a profitable stock for a year; my complaint is that people seem to never take these taxes into account. It's a BIG hit to sell in less than a year. We go to all this trouble trying to find a stock with a big margin of safety, and then are supposed to go and just throw that margin away by ignoring transaction costs. All I'm saying is take it into account. If you are in a 401K, it's not an issue. If you are in a high tax bracket, you need to do the math.

Even most brilliant managers only beat the S&P by a few percentage points over decades. Giving up 40% of your profit, or 25% over the long term cap gains amount, is a pretty difficult handicap to overcome. I don't know of any investor who has posted returns (over decades) that could make up for that kind of loss.

[yostyid]

We are in agreement that taxes are something that need to be noted on non-ira trades. I also believe the statement to the effect of letting the "tax tail wag the investment dog." My concern with your examples was presenting 40% as a round #. I see it as a bit high (even with most state taxes) and I would hope people are fully funding ira's to trade in if they are investing and are in those top end tax brackets.

If I am in a 25% tax bracket I will have a 10% difference between my short term and long term gain. In your example, 50$. If my company shows signals to get out and I see an opportunity with signals to get in, I would not skip the trades based on 50$ taxes. And who knows...in 2 yrs the rules on long term cap might get crushed and jacked back up to previous levels because tax incentives to businesses and investing don't work as a stimulus to the economy (not my personal belief but they dont ask me to vote on these acts...).

Most big money managers brilliant or not, can't care as much about long term performance. Thats no secret and its not always their fault. short term returns drive many fund investors like sheep. Managers are paid more to beat an index in the short term and invest as much cash from investors as they can. They are not rule#1 or even buffett/graham investors in practice, even if they are at heart. Most equity fund charters wont allow them to set any more than 10-20% in cash so they have to pump the money into the market whether there are bargains or not. That is different from the investors in this forum. That makes 15% a year a lot easier to hit when you're not trying to recover from a 25-30% drop from a bad year.

The bottom line is that the tools are designed to help you get in front of big money. In or out. Tweak them right and back test your company and they can work. Find a nice tool like marketbrowser.com that will let you check a watchlist in a few minutes then "go play". But Rule #1 is a strategy for not losing money, not just following 3 indicators. I do believe it helps take emotion out of the trades by using indicators. Because Mr Market has mood swings, if the signals say get out, I think its wise to get out. If they say its safe to get back in, go in. Markets tend to move down a whole lot faster than they move up so I don't mind a trip to cash sometimes to let things settle. I would also say it's easy to be a long term hold investor in a 4 yr bull market. I would like to see this same thread when we are in serious correction or sideways market. To me, emotions would be a lot higher if I was sitting long in a wonderful company because I know I am right about its value and that the market should figure that out any day now... any month now... any year now.

[joshuat]

There's a lovely book called Evidence Based Technical Analysis. Over 6400 TA methods were tested - none produced statistically significant results.

I'm done arguing about TA here - use it if you want. I will not bet my future and the future of my family on pseudoscience.

I honestly hope I'm wrong, and that you get great returns from your trades. I mean that.

[AlexG]

Marketocracy is great but it does have some serious bugs which management refuse to pay attention to

i.e. 2 weeks ago all but one of my stocks were up more than 1%, yet my portfolio was up .01% for the day


I like investopedia.com now that they upgraded and got the bug fixes out of the way. It is hard to find a simulator that could be it, all they need is forums

[capp53]

Yostyid

I agree with everything you say. I would rather pay a 40% tax on a gain then sit with a stock and hold it for a year as the price appreciation disintegrates!!!
We need to emphasize emotion more because when the blood hits the street how may of the buy and hold people will panic?