View Single Post
  #6  
Old 10-21-2002, 07:43 PM
Lorenzo Lorenzo is offline
Guest
 
Join Date: May 2002
Location: Left Field
Posts: 999
It's pretty boring, but buy and hold is one of the best strategies for younger amateurs like us. As previously noted, transaction costs can kill your return on investment if you are frequently trading.

Diversification is also key, to eliminate the unique risk of individual stocks. Of course, one cannot eliminate market risk.

None of the above applies if you just want to burn through your $1,500, though. In all seriousness, though, you might have more fun burning through $1,500 in Vegas.

To answer one of your questions, if you buy 1000 shares of ACME at $1.00/share and you sell all your stock when it hits $1.50/share, you will realise a gain of $500. You will pay a sales commission to execute the trade and the gain will be treated as ordinary income. If you're in a 28% tax bracket, you net $360 less sales commission, which may not seem like much considering you made a 50% short-term gain which is very hard to find.

For this reason, many people don't churn their assets and don't cash in until they're older and presumably in a lower tax bracket.