|
|
|
|
|
|
StockCentral :: Community
|
|
Join in on the discussion with other like-minded investors in our community forums. Learn about the fundamental investing methodology and participate in educational workshops in the Investing forums, stay up-to-date on StockCentral news and make suggestions to the StockCentral team in Central Square, and discuss your favorite stock or recent market news in our A-Z ticker-based forums.
|
| Note: You must be a StockCentral subscriber and logged in to post messages. |
|
|
| Author |
Messages |
|
Doug Gerlach
Cambridge, MA
http://www.iclub.com/
President, ICLUBcentral
 |
| 02/21/2007 2:54 PM |
|
2. Determine tax situation of your holdings
One of the advantages of investing in individual stocks is that you have some control over the timing of capital gains and losses in your portfolio. While it's generally not a good idea to let your investment decisions be governed by tax matters, the fact that selling a stock today might generate a lot of short-term capital gains could influence your decision. Knowing the tax situation of your holdings -- whether or not you might be liable for taxes on short- or long-term gains, or if selling provides a capital loss -- is important.
A further advantage of investing in individual stocks -- if you're following a long-term approach -- is that you seldom have to worry about the higher tax rate that applies to short-term capital gains. If you hold a stock for five years before selling at a big profit, you've effectively deferred paying taxes on your gains for that entire period. A capital gain is long-term if you held the asset at least one year and a day before selling. The tax rate on long-term capital gains is generally 15% (if your tax bracket is below 25%, then the long-term capital gains tax rate is 5%). Short-term capital gains are taxed at your regular tax rate as ordinary income. (If you're in the 28% tax bracket, short-term capital gains are taxed at 28%. If you're in the 33% tax bracket, you'll pay 33%. Either way, the 15% tax rate on long-term gains is a nice break.)
Of course, if you're looking at holdings in a tax-advantaged account, such as an IRA or 401(k), then tax considerations aren't going to be something to worry about.
Our task today is to determine the capital gains and losses that are unrealized within our portfolio. Later this information will help supplement the other information we discover that can help us make better selling or holding decisions.
I've attached an Excel spreadsheet that you can use to help organize some of this information. (There's also a screenshot if you can't use the Excel file.)
Note: if you own more than one tax lot of a stock (that is, you bought it more than once), then you might want to include each lot separately on the worksheet. If you participate in a DRIP or direct purchase plan, then for our purposes you can lump all the small reinvestments together as a single lot on one line in the worksheet.
Using the information that you collected yesterday, identify the total gain or loss for each lot, and whether it's short-term or long-term. The program has a couple of formulas to calculate the gains and the percentage each holding makes up of the entire portfolio, so you can copy rows as needed to include all your stocks.
Tomorrow we'll start looking at the overall picture of your portfolio.
Doug
|
 Attachment: Portfolio.xls
|
Posting from ICLUBcentral world headquarters in the Harvard Square's historic College House, Cambridge, MA
 |
|
|
|
| Note: You must be a StockCentral subscriber and logged in to post messages. |
|
|
|
ActiveForums 3.7
|
|