Investing in stocks- who’s right?

[dennis thompson]

Picking stocks to invest in is hard. Last week, Carl Icahn, a brilliant billionaire investor, sold Occidental petroleum. Warren Buffett, a brilliant billionaire investor, bought Occidental petroleum. Who’s right?
Me? I bought Chevron🙏🏻

[Prashun Patel]

Monkeys and darts.

I’d bet on Buffet though. He’s a pretty smart monkey and is the least unlikeable of the billionaires.

[Jim Becker]

The vast majority of folks probably would be challenged to effectively invest in individual stocks, unlike "back in the day" when things were less complicated, less volatile and without the immediacy that electronic trading has brought to the game. Things were more "long haul" in previous times. In today's market, I'll stick to mutual funds... That said, people like Icahn and Buffett have the capital to do things that mere mortals cannot even consider and in many cases, can turn a "loss" into a "gain" because of tax benefits and other factors. Sometimes, there may be an element of "controlling something" or "controlling outcome" that is also what they are willing to risk a few shekels for up front.

[Malcolm McLeod]

...sold ... bought ... Who’s right?
Me? I bought Chevron🙏🏻

Unless you know the full story, there is no way to tell. Maybe they are BOTH right? Each for their own reasons. And just maybe it's having little to do with any actual ownership position in Occidental?

Me? Diversify:cool:. If you like Chevron (::O&G), buy all the O&Gs. And solar. And maybe wind and biofuel and hydro, too. They are all in the energy sector; maybe a sign industrial production will recover (and so energy demand). And maybe skip nuclear, since there hasn't been a new permit in the USA in ...what? ...40 years?!?

Maybe.;)

[glenn bradley]

Folks responding pretty well have it covered. The reason for any buy or sell is an ingredient in an investment strategy recipe. Both moves are right. We just don't know why one bought and why one sold. Most assuredly it was for some advantage for the given portfolio.

[Bill Dufour]

Then rules have changed a little bit with no fees to buy or sell but very few managed funds do better then the overall market. Get a very low annual fee ETF index fund fee below 0.05%, and you will do better then you can unless you watch things 24/7/365. Almost all managed funds have a lower return then the index funds after you deduct the fees.
A one percent fee will have cost you about one half million dollars when you retire.
Dividends are taxable income unless they are in a IRA or mutual fund. Same for any gains from selling a profitable stock to buy another.
Bill D.

California taxes long term capital gains like regular income, no tax break of any kind.

https://www.nerdwallet.com/blog/investing/millennial-retirement-fees-one-percent-half-million-savings-impact/

[Bill Dufour]

Warren Buffet averages 8.75% growth over 25 years.
US stock market 9.26%
So buy a low fee index fund unless you can do better then the most highly regarded investor, who does it full time, with a staff, for pay.
Bill D

http://www.lazyportfolioetf.com/comparison/warren-buffett-vs-us-stocks/

[Greg Funk]

Warren Buffet averages 8.75% growth over 25 years.
US stock market 9.26%
So buy a low fee index fund unless you can do better then the most highly regarded investor, who does it full time, with a staff, for pay.
Bill D

http://www.lazyportfolioetf.com/comparison/warren-buffett-vs-us-stocks/Or you could just buy Berkshire Hathaway which has returned 10.8% on average over the past 25 yrs. The suggested Warren Buffet portfolio referenced in the article is not what Warren implements for himself.

[Terry Wawro]

Who knows. Maybe Carl Icahn had too much OP and Warren Buffet had too little.
Carl might need to raise some cash and Warren will sit on cash for years until he spots something he thinks might be a value.
Me? I'll just sit here holding my index funds and ride the waves.

[Jim Koepke]

Who knows. Maybe Carl Icahn had too much OP and Warren Buffet had too little.

Warren Buffet has a policy of only buying into things he understands. That is why he doesn't invest in many technology stocks. He supposedly often says at meetings, "I only buy what I know. It makes it easier to explain my mistakes." Personally Warren Buffet is of interest to me.

Carl Icahn's investment style is unknown to me.

Comparing growth may not include dividends. It might also be much of the extra 0.51% growth involved market sectors in which Buffet does not feel comfortable investing.

jtk

[Scott Clausen]

Alibaba is cheap right now, could be another one I miss

[Bruce Wrenn]

Carl Icahn has a BAD HABIT of investing in companies and them bleeding them to death, ruining both other investors and employees lives. Warren Buffet on the the other hand is in it for the long term. What other portfolio owns a railroad (BNSF?) If Icahn owned it it would be a former railroad, liquidated for his personal gain at the expense of others.

[Bill Dufour]

How much longer can warren buffet give stock advice? Will his company do as well after he is gone?
Bill D

[Ed Aumiller]

This is easy.... watch what I do...

If I buy... you sell
If I sell... you buy

I always do it wrong.... But still trying...

Wish I had as much as I lost !!!!!!!!!!!!

[Thomas McCurnin]

Oil stocks are probably a little over priced right now, the time to buy was a month ago, but oil prices will still go up, so owning a percentage of oil stock in your portfolio is not a bad thing. I think I have about 15% of my overall holdings in oil.

[Rich Engelhardt]

Picking stocks to invest in is hard. Last week, Carl Icahn, a brilliant billionaire investor, sold Occidental petroleum. Warren Buffett, a brilliant billionaire investor, bought Occidental petroleum. Who’s right?
Me? I bought Chevron
I avoid the stock market since I don't understand how best to avoid paying taxes on money I might make playing the market.
I'm a firm believer in the fact that any idiot can make money. The true genius comes in hanging on to what you made.

Icahn & Buffet - doing the exact opposite thing - obviously have different strategies towards the goal of putting as much money in their pocket as they can.
(It's taken me decades but - I finally got it across to my wife that you can go deep in debt to save money & you can lose money to make money & how being debt free isn't the best course of action for us at this stage in our lives...((our "Golden years")).<<---proof that there is no one size fits all when it comes to savings & investments.

[Jerry Bruette]

How much longer can warren buffet give stock advice? Will his company do as well after he is gone?
Bill D

I'm guessing we won't get any advice from him after he's gone.

[Andrew More]

How much longer can warren buffet give stock advice? Will his company do as well after he is gone?
Bill D


1) Until he's dead, though I suspect at 90 something he's not as active or as sharp as he used to be.
2) Probably yes, maybe better, maybe worse, hard to say. It's unclear if even Warren Buffett in 2020 could out perform Warren Buffett in 1960s. The game has clearly changed over the years. One thing he's been pretty clear on is that he struggles with the 330+ Billion he has under management in a way the average piker does not, because it's very difficult to move into or out of positions without effecting the overall market. This is one of the reasons why as funds become more popular they tend to struggle. It makes it difficult to invest in far smaller opportunities which might have larger upside, and invalidates a lot of strategies. Finally, a lot of the moves done by Berkshire in recent years have likely been the result of his hand picked lts and not necessarily Warren himself, though he supposed approves everything.

FWIW, I agree with the other posters. I find it interesting to see what other managers are buying and selling, but their positions and strengths are not mine.

Most people are better off with index funds. That having been said, I think we might be in for some interesting times in the next 5 to 10 years, if everybody goes with index funds. Even now there are people asserting that some of the wild swings in the market are a result of the growing influence of such funds and their strategies. Jack Bogle him self, founder of Vanguard and inventor of the index fund, said that once we get to a certain percentage of capital invested in index funds that there is likely to be problems, since the tail starts to wag the dog.

[Jim Koepke]

I avoid the stock market since I don't understand how best to avoid paying taxes on money I might make playing the market.

This is a concept that has always baffled me.

If you had invested $30,000 in Apple at $30/share and sold at $300/share you would have made $3,000,000 minus the original investment.

Even if you had to pay 50% taxes (unlikely but just for grins let's use that number) you would have around $1,500,000 for your own. Is the paying of taxes on a great profit so painful you would keep yourself from a better life because you may have to pay some taxes?

I am not sure but Apple may have split in that time period so the math may be way off.

For the record, part of my retirement is in 457k & 401k accounts. They have afforded me a better quality of life even though mostly untouched until recently. My understanding is this year there will be a minimum amount withdrawal required.

jtk

[julian abram]

Are you an investor or a trader? If you are an investor, invest long term in low cost mutual funds and sleep well at night. If you are a trader not working professionally in the investment community, good luck.

[Jerry Bruette]

I avoid the stock market since I don't understand how best to avoid paying taxes on money I might make playing the market.
I'm a firm believer in the fact that any idiot can make money. The true genius comes in hanging on to what you made..

If the money invested in the market is in a Roth account you won't pay any taxes on money made in the market. The taxes are paid on the money invested not the money made.

[Bill Dufour]

This is a concept that has always baffled me.

If you had invested $30,000 in Apple at $30/share and sold at $300/share you would have made $3,000,000 minus the original investment.

Even if you had to pay 50% taxes (unlikely but just for grins let's use that number) you would have around $1,500,000 for your own. Is the paying of taxes on a great profit so painful you would keep yourself from a better life because you may have to pay some taxes?

I am not sure but Apple may have split in that time period so the math may be way off.

For the record, part of my retirement is in 457k & 401k accounts. They have afforded me a better quality of life even though mostly untouched until recently. My understanding is this year there will be a minimum amount withdrawal required.

jtk
I heard Elon Musk sold 10 billion of his Tesla stock. A few months latter he sold another 10 billion to cover the tax bill.
Bill D.

[Bill Dufour]

I read that warren buffet does not let his employee retirement fund buy index stocks. Not sure if mutual funds are allowed or not.
Bill D

[Andrew More]

I read that warren buffet does not let his employee retirement fund buy index stocks. Not sure if mutual funds are allowed or not.
Bill D

I doubt that is true, since he has said repeatedly that when he passes on he wants his wife's inheritance in a S&P 500 account. So one of these two statements is incorrect, and he's been pretty public about his support for index funds for the average investor.

[Michael Weber]

Man, I’ve tried for 3 days to add my “wisdom” to this thread. As Julian says, good luck. Beware unknown future economic, political or natural events. “A rising tide lifts all boats”. The opposite is true as well. We live in a too complex and under regulated financial system that based on past events appears to be, partially due to technology, pretty easily manipulated. I see this repeatedly and unfortunately experienced it. Don’t invest more in individual stocks than you can afford to lose. Excuse my cynicism. I’m old so it’s natural.

[Brian Holcombe]

Every sector seems to have its day in the sun and it’s often spurred by unusual events. With regard to who is correct; Buffet is a dividend/growth investor, so he’s picking with that metric as some aspect of the calculus. Icahn is a hedge fund manager/activist investor. Buffett buys because he likes how the company operates, Icahn invests when he wants to affect how the company operates.

Buying and selling is not enough information, you need to know the time horizon to know who was successful.

I admire Buffett but his timing on oil stocks has always baffled me, he tends to buy them when oil is high and sell them when oil is low.

[Rich Engelhardt]

This is a concept that has always baffled me.

If you had invested $30,000 in Apple at $30/share and sold at $300/share you would have made $3,000,000 minus the original investment.

Even if you had to pay 50% taxes (unlikely but just for grins let's use that number) you would have around $1,500,000 for your own. Is the paying of taxes on a great profit so painful you would keep yourself from a better life because you may have to pay some taxes?Nothing is ever that simple and clear cut & hindsight is always 20/20.
Do you know someone that has managed to do this- invest $30k @ $30 a share and sell it later @ 10 times it's face value?
I think that's such a rare thing it would fall under the category of a fluke.

Anyhow - it isn't the actual taxes that people like myself want to avoid, it's the type of tax and where the money goes. That's why people will give millions to a charity in order to avoid paying millions in taxes.

[Andrew More]

Nothing is ever that simple and clear cut & hindsight is always 20/20.
Do you know someone that has managed to do this- invest $30k @ $30 a share and sell it later @ 10 times it's face value?
I think that's such a rare thing it would fall under the category of a fluke.

Over what time horizon? My uncle claims to have had a stock do this. Peter Lynch is pretty famous for calling certain stocks 10 baggers for this reason, so he's done it. I'd have to check my retirement account inflow/outflow to know if I've done this with my index funds. I think if you mean overnight or a few weeks/months, absolutely gambling, if you mean over 20-30 years, that doesn't seem unreasonable. I think it's also going to depend on the stock. I don't expect Apple or other large staid companies to go 10x, I would not be surprised to see some of the new pot stocks do that in the next 5-10 years. I believe AMD has done it over the past 5 or so years, as they have had a serious turn around, going from $2 a share to $110.

[Zachary Hoyt]

Trading stocks has always looked to me (as an outsider) as just another form of legalized gambling, like casinos and horse racing, so I haven't paid it much attention. I take a gamble when I buy a used machine, or when I bought my house in an auction, but for me the potential gain is worth the potential risk in those kind of situations. Ben Hecht said, “Trying to determine what is going on in the world by reading newspapers is like trying to tell time by watching the second hand of a clock." and it's only gotten worse since then as information keeps moving faster and faster.

[Terry Wawro]

Trading stocks has always looked to me (as an outsider) as just another form of legalized gambling, like casinos and horse racing, so I haven't paid it much attention.

Trading stocks, stock futures, puts, calls etc., is a lot like gambling. However investing in stocks (and more importantly) well diversified stock funds is quite different and has allowed many a common blue collar worker, who slowly and consistently invested year after year, to retire with more money than they ever even earned on the job.

[dennis thompson]

Trading stocks has always looked to me (as an outsider) as just another form of legalized gambling, like casinos and horse racing, so I haven't paid it much attention. I take a gamble when I buy a used machine, or when I bought my house in an auction, but for me the potential gain is worth the potential risk in those kind of situations. Ben Hecht said, “Trying to determine what is going on in the world by reading newspapers is like trying to tell time by watching the second hand of a clock." and it's only gotten worse since then as information keeps moving faster and faster.
The difference between the stock market and gambling is that, at least historically, over the long run you will most likely lose money gambling ( that’s why casinos exist) and make money investing (not short term trading) in the stock market

[Zachary Hoyt]

Trading stocks, stock futures, puts, calls etc., is a lot like gambling. However investing in stocks (and more importantly) well diversified stock funds is quite different and has allowed many a common blue collar worker, who slowly and consistently invested year after year, to retire with more money than they ever even earned on the job.
Yes indeed, that's why I said trading in my first post. Long term investing is not something I've done, but it makes a lot more sense to me.

[Malcolm McLeod]

Nothing is ever that simple and clear cut & hindsight is always 20/20.
Do you know someone that has managed to do this- invest $30k @ $30 a share and sell it later @ 10 times it's face value?
I think that's such a rare thing it would fall under the category of a fluke.

Anyhow - it isn't the actual taxes that people like myself want to avoid, it's the type of tax and where the money goes. That's why people will give millions to a charity in order to avoid paying millions in taxes.

Yes, sort of - - My father was on home office payroll, and his company did a lottery of those employees to offer options at $2/. Bad Dad was selected and accepted the offer. The company did IPO at $6/, went to to $60/, split 10:1, went back to $66/, split 10:1 again, and last I remember settled down around $40/ after 2-3 yrs IIRC. He retired at 56. :D

My (former) company offered me stock options. They went bankrupt. :eek:

Not long ago, I read about land for sale in a nearby suburb for what i considered a heady $10k/acre. I lamented that when I moved to the area I could have bought that entire side of town - all of it - for $10k. My BIL laughed, shrugged, and said his family did own it. At the time I moved, I didn't buy it 'cuz I didn't have $10k; his family sold it 'cuz they needed $10k.

...Luck? Investing? Gambling? Each will have to decide.

And my father... he struggled to come up with the cash to buy those options, and it wasn't a lot, certainly not by today's income standards. His windfall IPO did not make him wealthy, since the initial investment was relatively small, but with military retirement, it did allow some breathing room. Good thing he didn't know what the future was at the time... he probably would have sold me into slavery to buy more options. I'd probably do the same.

[Greg Funk]

I heard Elon Musk sold 10 billion of his Tesla stock. A few months latter he sold another 10 billion to cover the tax bill.
Bill D.He actually bought a pile of stock using options that were to expire this year. The purchase of stock triggered a large tax bill forcing him to sell to cover the taxes.

[Jerome Stanek]

I'm waiting for my CVS stock to split they were saying when it hits $122 a share that they would split. $103 today.

[Rich Engelhardt]

Over what time horizon? My uncle claims to have had a stock do this. Peter Lynch is pretty famous for calling certain stocks 10 baggers for this reason, so he's done it. I'd have to check my retirement account inflow/outflow to know if I've done this with my index funds. I think if you mean overnight or a few weeks/months, absolutely gambling, if you mean over 20-30 years, that doesn't seem unreasonable. I think it's also going to depend on the stock. I don't expect Apple or other large staid companies to go 10x, I would not be surprised to see some of the new pot stocks do that in the next 5-10 years. I believe AMD has done it over the past 5 or so years, as they have had a serious turn around, going from $2 a share to $110.
Time & the ability to have spare funds to invest - are the flies in the ointment where these stories are concerned.
You might hear of one or two - but - you never hear about the millions of people that threw away money on tech stocks like 3Com, US Robotics, Wellfleet, Gateway, Tandy, Packard Bell and a whole host of others I can't come up with on the spur of the moment that were giants in that field that all had ups and downs over the years, then finally went down for the last count.
Even Apple looked like it was down for the count numerous times.
I have to wonder how many investors hung on to Apple stock when Steve Jobs was fired?


I believe AMD has done it over the past 5 or so years, as they have had a serious turn around, going from $2 a share to $110.AMD has a history of doing that. Matter of fact, when I retired in 2010 - their stock was at an all time low. Had I invested $30k in it and left it there for 30/40 years, I would have maybe broken even at best.

My whole point here is - I don't know enough about "playing the market" & how best to turn my losses into profits.

[Andrew More]

Time & the ability to have spare funds to invest - are the flies in the ointment where these stories are concerned.
Not really. It's pretty simple, spend less than you make, and invest the rest. And that's not a matter of being a high income earner, there are numerous stories about broke doctors and millionaire receptionists.


You might hear of one or two - but - you never hear about the millions of people that threw away money on tech stocks like 3Com, US Robotics, Wellfleet, Gateway, Tandy, Packard Bell and a whole host of others I can't come up with on the spur of the moment that were giants in that field that all had ups and downs over the years, then finally went down for the last count.
No this is true, nobody knows what will happen in the long term, or even often the short term. However, the general trend is up, because the economy is expanding, and if you diversify into about 20-30 stocks you'll have winner to balance out the losers. You don't need to be right all the time, and it's not going to happen, you just need to be right more often than your wrong.


My whole point here is - I don't know enough about "playing the market" & how best to turn my losses into profits.
Then don't, buy a low cost index fund, and ignore it for the next whatever many years. The market effected by the economy, and that has been growing, so for the past 100-200 years the trend has been up. Don't feel comfortable with that, buy some US T-bills. Don't like that, hide it in a mattress. The truth is that there is no safety, and you need to make calculated risks. Even doing nothing and bemoaning your fate is a decision and action and it will have consequences.

[Rich Engelhardt]

Then don't, buy a low cost index fund, and ignore it for the next whatever many years. TAs I mentioned earlier - I don't and didn't. I chose to sink my money into something else & at 70 years old, I won't be changing any time soon - well - not in that way anyhow ;) . I do have to work out the final details on the exit strategy so I can pass along as musch as possible to the people I think should get it and not the tax man and/or nursing homes.

[Jim Koepke]

My use of Apple was as an example.

My question was directed at the concept of those who say, "I don't want to make gobs of money because then I would have to pay taxes on it."

The unsaid part sounds like, "I would rather not have a million dollars if the government would get a dime of it."

That is what baffles me, a person so wrapped up against taxes they would avoid making some money.

For the record my stock picking prowess is nonexistent. That is why the professionals in the fund business do it for me.

jtk

[Kev Williams]

Throughout my life I've found that I have a gambling jinx. The type of gambling doesn't seem to matter. And I know how to casino-gamble, what to do, betting strategies, but when you're jinxed it doesn't matter. Our last weekend trip to Vegas was almost 20 years ago. During that trip, and I counted, I played 27 hands of blackjack, in 3 different casinos over 2 days; I pushed 7 hands, won 0. . What are the odds of going 0 for 27 on a basically 50/50 chance?

Long term investing? I started doing that 'somewhat' in the '80's. First try lasted about about 8 years, cashed out at around an 85% loss. Second try was a mutual fund I started the 90's. After around 12 years and nearly $110k invested via monthly payments, the recessions just kept wiping it out-- I finally cashed out $4400. This was a mutual fund that, before I signed on, posted an over 13% average return the previous 20 years, and I lost over 95% of the money I put in...

Short term investing? Lost $17k on unleaded gas and natural gas Call options one day after one POTUS TV news conference; 'we're going to start looking into these skyrocketing energy prices...' -- next day my options were worthless. Had I went with Put options, my money would have increased over 9x...

So yeah, 'a jinx' may be a bit tongue-in-cheek, but I have no stocks, bonds, retirement accounts, no investments of any kind. And we're way better off than we were 20 years ago...

--YMMV-- :)

[Malcolm McLeod]

My use of Apple was as an example.

My question was directed at the concept of those who say, "I don't want to make gobs of money because then I would have to pay taxes on it."

The unsaid part sounds like, "I would rather not have a million dollars if the government would get a dime of it."

That is what baffles me, a person so wrapped up against taxes they would avoid making some money.

For the record my stock picking prowess is nonexistent. That is why the professionals in the fund business do it for me.

jtk

I guess I've never met this person(s), but admittedly they might be out there. However, I have met lots of people who very much factor taxes into any stock sale.

Except in very specific cases, an investor has complete control over the timing of a sale. Why wouldn't they adjust for when and how much tax burden is incurred?

[Thomas McCurnin]

Stocks are really not a guessing game. An educated guessing game, based on a company's past and projected performance, and whether you want stock value gain or dividends.

As for commodity stocks like oil, its all about the project value of the commodity in the next year. Oil is expected to go up, way up, so yes, I would buy oil stock, although the time to buy was about a month ago

Commodities like oil, pork bellies or gold are a bit of a crap shoot, but certainly having a stock portfolio with 10-15% of petroleum stock is never a bad thing.

[Rich Engelhardt]

My question was directed at the concept of those who say, "I don't want to make gobs of money because then I would have to pay taxes on it."

The unsaid part sounds like, "I would rather not have a million dollars if the government would get a dime of it."

That is what baffles me, a person so wrapped up against taxes they would avoid making some money.I never said that.
What I said was, I never figured out how to keep the .gov from sticking their hands deep into my pockets by investing in the market - so - I just never got involved in it.

The unsaid part of it is - I would rather not have a million dollars if the .gov is going to take a huge chunk of it - when I can make a million dollars some other way that the 'gov isn't going to grab a bunch of it.

[Greg Funk]

The unsaid part of it is - I would rather not have a million dollars if the .gov is going to take a huge chunk of it - when I can make a million dollars some other way that the 'gov isn't going to grab a bunch of it.Money laundering? :)

[Malcolm McLeod]

LT capital gains tax rate for most middle class incomes should be 15% IIRC. Hard to beat that … legally at least.;)

I’d probably go with moonshining; more job satisfaction than Mr. Funk’s idea.:cool:

[Greg Funk]

LT capital gains tax rate for most middle class incomes should be 15% IIRC. Hard to beat that … legally at least.;)

I’d probably go with moonshining; more job satisfaction than Mr. Funk’s idea.:cool:Just in the middle of re-watching the TV series Justified. I'll pay closer attention to the moonshine business...

[Malcolm McLeod]

BC should have good climate for a Scotch-tradition spirit and I can get mesquite barrels for a TRUELY UNIQUE finish. Wanna partner?

[Jim Koepke]

I never said that.
What I said was, I never figured out how to keep the .gov from sticking their hands deep into my pockets by investing in the market - so - I just never got involved in it.

The unsaid part of it is - I would rather not have a million dollars if the .gov is going to take a huge chunk of it - when I can make a million dollars some other way that the 'gov isn't going to grab a bunch of it.

Someone already presented a good answer for that, a ROTH IRA. Invest income after it has been taxed and withdraw in retirement tax free.

Another person mentioned long term capital gains are taxed at 15%. That means you get to keep 85%. Someone has to pay for roads, bridges, safety and other public needs.

jtk

[Rich Engelhardt]

Someone already presented a good answer for that, a ROTH IRA. Invest income after it has been taxed and withdraw in retirement tax free.

Another person mentioned long term capital gains are taxed at 15%. That means you get to keep 85%. Someone has to pay for roads, bridges, safety and other public needs.
@ 70 years old and retired now for 10 years - my ROTH days are long past. Even for the 20 years preceding them, my 401 plan was far too good to even think about a ROTH IRA.

Besides - by leveraging the losses I had in real estate, I was was able to withdraw nearly all of my 401 and IRA money and pay little to no federal tax on it anyhow - so - a ROTH held/holds no interest for me.

Roads - bridges - safety and other public needs don't come from your federal or even state taxes for the most part. The bulk of that comes from real estate and state sales tax dollars - of which I don't mind paying a fair amount.
Very little you have taken out of the money you earn in the stock market goes directly into paying these taxes.

Again - and this goes back to the OP asking "Who's right".
The answer is simply both are right and both are wrong - there is no "one size fits all" in investing. You either know what it's about - or - you are served up as lunch.
Whenever I hear someone mention my "portfolio", I run - I run away fast. My reason is simple - I do what so far has worked well for me and it's not something anyone else would likely understand.

[Scott Clausen]

Doing what works for you is probably best anyway. I remember when the pandemic was looming. I didn't sell any stock and then lost a considerable sum. I was highly pissed about how stupid I was. At the bottom, which I didn't know at the time, I bought Amazon, Google and S&P 500. Well the market came back and I have made nice money on all three. The taxes alone would have been daunting if I had sold. It may be the only time I time I am able to time the market.

[Jerry Bruette]

The only time I pay an "income" type tax is when I make money and I'm happy when I make money.:)

[Bill Dufour]

Do not forget to allow for state income tax on top of the 15% federal long term gains tax.
Bill D

[Jim Koepke]

Do not forget to allow for state income tax on top of the 15% federal long term gains tax.
Bill D

It didn't occur to me that my current state of residence doesn't have an income tax until it was time to have our taxes done. Some of my income used to come from California so there was state income tax on that. Since selling our rental property in California none of our income from there has been taxable.

State income taxes are usually equal or less than federal taxes.

It is difficult to shed a tear for those who feel they are paying too much in taxes when so many are unable to earn enough to pay taxes. It especially irks me when some of the richest people in our country are paying zero income taxes do to the trickery of accounting.

jtk

[Stan Calow]

I am always surprised that states with no income tax can make enough revenue to run their states through other means. I know oil & gas states earn a good deal by taxing that, but that seems a precarious way to fund a state.

[Jim Matthews]

tMy reason is simple - I do what so far has worked well for me and it's not something anyone else would likely understand.
It sounds like being born in the correct decade was a good starting point, and after that, having a suite of fully funded public services *that someone else paid for* left discretionary funds in your accounts.

Broadly speaking, you've described the same attitude toward taxation that has made Greece the haven of opportunity for young people that it is today.

This sentiment is a case perfect example of why people of generous spirit don't stay here.

Ducking taxes isn't smart - it's a wealth transfer from those that can least afford it.

[Rich Engelhardt]

It sounds like being born in the correct decade was a good starting point, and after that, having a suite of fully funded public services *that someone else paid for* left discretionary funds in your accounts.

Broadly speaking, you've described the same attitude toward taxation that has made Greece the haven of opportunity for young people that it is today.

This sentiment is a case perfect example of why people of generous spirit don't stay here.

Ducking taxes isn't smart - it's a wealth transfer from those that can least afford it.

Where to start on this mess...
Public services are funded by local property taxes for the most part. I pay property taxes on 7 different properties - plus - since I only reside in one of those, I pay the max for the other 6.
In other and plainer terms - I contribute 7 times to the public services that nearly everyone else only contributes towards once.
Did you catch that? I pay 7 times - others pay 1 time - now pray tell me, how does that become me having a full suite of those services that "someone else" paid for?
If anything, it's the other way around.


Umm- again you have things screwed up. People that contribute to charities - the mega dollars - do it because it's a tax deduction. A way of directing their money towards what they wish to contribute it towards - not some sloppy top heavy cluster... that our tax system has become.
I don't know about Greece & I don't care to know about Greece. My guess is that you aren't nominating me for citizen of the year - so - If that's a veiled personal attack, I'm not going to play.

"Ducking" taxes?!?!? What in the world are you talking about? I shelter my income from the taxes I can - the others, that I can't, I suck it up and pay them.
& yes - that includes every single penny of "cash" transactions.
If a penny on income comes into our house, it gets reported. Period. End of discussion.
I hate paying taxes - but - paying penalties and interest on top of taxes is just plain stupid.

[Bill Dufour]

Property taxes are unfair. I

[Bill Dufour]

Property taxes are unfair. The poorest areas pay the least in property taxes while the rich mansion neighborhood pays more. But I bet the average millionaires house never has the cops called in to break up fights, police dog fighting rings, drive bys, drug dealers etc.
Bill D

[Gary Ragatz]

Roads - bridges - safety and other public needs don't come from your federal or even state taxes for the most part. The bulk of that comes from real estate and state sales tax dollars - of which I don't mind paying a fair amount.


I don't know how things work in N.E. Ohio, but around here, there is basically no road or bridge project that isn't partially funded by a federal grant or federal matching funds. Federal Community Development Block Grants help fund all sorts of local projects - water treatment, libraries, parks and playgrounds, etc.

[Rich Engelhardt]

round here, there is basically no road or bridge project that isn't partially funded by a federal grant or federal matching fundsThose funds come from federal gas taxes - not income taxes & they go towards only specific roads/bridges.
The county is mostly responsible for local roads & bridges.
Here's where property taxes go:
https://www.rate.com/resources/where-do-my-property-taxes-go

[Jim Koepke]

I pay property taxes on 7 different properties - plus - since I only reside in one of those, I pay the max for the other 6.
In other and plainer terms - I contribute 7 times to the public services that nearly everyone else only contributes towards once.

Do those other 6 properties have roads for you to be able to visit them?
Do they have the protection of the local fire district or police departments?
Are they all for personal use generating no income?


Property taxes are unfair. The poorest areas pay the least in property taxes while the rich mansion neighborhood pays more.

In California a person who recently purchase a property is paying a lot more than a next door neighbor in an equal home who has had the property passed through family for years. If that mansion has been owned by the same family through many generations, it could be paying less in property tax than a home in a poorer area.

My guess is someone in the county assessor's office was happy when my home in California was sold. The property tax likely went up many times from what it was.

What is great in some counties is the tax basis can be moved to a different property in the same county. We didn't look into this since we moved to a different state.

jtk

[Brian Holcombe]

You all should move to NJ, property taxes to your heart’s content and then even more.

[Bill Dufour]

I really should dump all my stocks that have lost money for the loss. Even If I buy them all back the next day. That way if I sell some for a profit this year it will balance out. Of course when I go to sell them again in a few years the cost basis will be lower so taxes get higher.
Bill D

[Brian Holcombe]

That’s called a wash-sale, I believe you have to wait 30 days before purchasing the same stock if you want to claim the loss.

[dennis thompson]

I really should dump all my stocks that have lost money for the loss. Even If I buy them all back the next day. That way if I sell some for a profit this year it will balance out. Of course when I go to sell them again in a few years the cost basis will be lower so taxes get higher.
Bill D
I think you have to wait a while (30 days?) before you them back or you won’t be able to claim the loss. You can,of course , buy different stocks right away, but as Vanguard tells me all the time “ speak to your accountant”

Brian posted his reply as I was typing mine😊

[Bill Dufour]

Right you two are. I forgot the wash sales rules.
Bill D

[Bill Dufour]

Interesting gasoline investment choice. Do I fill up now before prices go up or do I wait so I have more room in the tank to buy more at a slightly higher price but still before the peak prices. What I hope will be the new peak prcies.
Bill D

[Rich Engelhardt]

Do those other 6 properties have roads for you to be able to visit them?
Do they have the protection of the local fire district or police departments?
Are they all for personal use generating no income?
I fail to see your point??!!??
Of course there are roads - paid for by the property taxes I pay on the properties.
Of course they have fire and safety protection - again paid for by the property taxes.
No - they are investment properties. Taxes, just like insurance, are a cost of doing business.
I guess you could successfully argue I don't pay the taxes, I just pass the cost along via the rental income - but - since that is 100% true of any tax on any business venture, I fail to see anything wrong with that.
Maybe you can make your point a little bit clearer.

[mark mcfarlane]

For me its 80% index funds and 20% high risk individual stocks.

Inflation will diminish the purchasing power of your retirement savings if you don't have your savings in some kind of return-paying investment, be it stocks, bonds, real estate,... The general market has outperformed inflation for decades, when measured over decades. Any given month is another story.

It's been a really bad year so far in the market but I am confident it will recover in the next decade.

[Jim Koepke]

Maybe you can make your point a little bit clearer.

“The Only Two Certainties In Life Are Death And Taxes” -- Benjamin Franklin


Public services are funded by local property taxes for the most part. I pay property taxes on 7 different properties - plus - since I only reside in one of those, I pay the max for the other 6.
In other and plainer terms - I contribute 7 times to the public services that nearly everyone else only contributes towards once.
Did you catch that? I pay 7 times - others pay 1 time - now pray tell me, how does that become me having a full suite of those services that "someone else" paid for?

You own 7 times the properties of the average person. Each of those properties receives as much right to public service as the adjacent properties. Why do you feel you should be allowed to only pay for one property while owning the other properties?

If two people both own properties should the one owning a two bedroom house on an eighth of an acre pay the same property tax as the one living in a 10,000 square foot home on 10 acres?

Surely if you have properties earning income your tax advisor has explained depreciation to you. Of course hopefully they have also explained the laws of recapture to you.

Nary a soul loves paying taxes. Though allowing the tax system to become the determining factor in how my money is earned or invested is not an endeavor that appeals to me. Though at time my friends have been told it wouldn't bother me to have to pay millions in taxes. The reasoning is if my taxes are a million dollars, there is likely still at least a million left for me.

My money comes in, my taxes are paid, life goes on.

All too many of my former co-workers thought it was a great idea to over claim dependents. Then when tax time rolled around they had to scramble to borrow money or hurriedly liquidate assets at an inopportune time.

Some people think me a fool for filing my W-4 at zero dependents. After all the extra money being withheld isn't earning interest. Well once a year we tend to get a nice check from the fed (now it is direct deposit). At times when we had extra income it helped to pay taxes owed.

jtk

[Rich Engelhardt]

You own 7 times the properties of the average person. Each of those properties receives as much right to public service as the adjacent properties. Why do you feel you should be allowed to only pay for one property while owning the other properties?I'm only guessing here - but - I guess you missed the part where I said paying property taxes are a cost of doing business - just like having insurance. You could argue successfully that I don't really pay the taxes, I just pass the cost along, but, that's true of every business. You literally can't tax a business of a professional.


Nary a soul loves paying taxes. Though allowing the tax system to become the determining factor in how my money is earned or invested is not an endeavor that appeals to me. Well then - fine. How I choose to invest does take paying taxes into account. If the tax man is going to offer me an incentive, I will take it if I can. So do tens of millions of others. Anyone that itemizes their taxes does take into account how their money is invested. If they didn't, they wouldn't go to the bother of itemizing.


Some people think me a fool for filing my W-4 at zero dependents. After all the extra money being withheld isn't earning interest. Well once a year we tend to get a nice check from the fed (now it is direct deposit). At times when we had extra income it helped to pay taxes owed.We figured out the best filing status, based on our income and deductions, so we could end up at the end of the tax year either owing nothing or owing a very small amount. Just letting the IRS handle it is the most expensive way there is. If you sit down with the budget a few times a year & set aside money you'll need at tax time or free up money if there's extra that's all it really takes. If you don't want to put in that effort, then that's up to you. I don't think anyone is foolish for letting the .gov keep and use their money. If they are the type of person that has to use that kind of forced savings, then that's what works for them.

I never did like putting the property taxes & insurance in escrow either - where the money just sits and does nothing.

A little pre planning when it comes to filing can go a long way towards striking a good balance between having to scramble around April 15th or getting your own money back. FWIW - a tax refund isn't something you earned or extra income. When you get a tax "refund", you are just getting your money back.
If you go to the race track and wager $2 on a horse and it pays off and you get $2.20, you haven't made $2.20 - you made $.20. Same with a tax refund - only worse since that money you already own is just sitting dead doing nothing for you.

Since I started working for a pay check at 6 years old, I never could afford the luxury of having my hard earned money just sit somewhere with no clear defined purpose.

[Bill Dufour]

Last few weeks my John Deere stock has been doing well. They make farm equipment and excavators. Both will be needed to rebuild.
Bill D

[Brian Holcombe]

Let’s not forget that it’s folks like Rich, investing, that allow folks who can’t afford to purchase a home the ability to rent one. That only happens with an investor risking their capital. Frankly, I prefer them to be given plenty of leeway on how to utilize capital by not overburdening with excessive taxes or heavy regulation. His replacement is a large corporation risking the investors money rather than a local fellow risking his own money.

[Bill Dufour]

Let’s not forget that it’s folks like Rich, investing, that allow folks who can’t afford to purchase a home the ability to rent one. That only happens with an investor risking their capital. Frankly, I prefer them to be given plenty of leeway on how to utilize capital by not overburdening with excessive taxes or heavy regulation. His replacement is a large corporation risking the investors money rather than a local fellow risking his own money.
And that profit from the investment leaves the county and probably the state to enrich a big company somewhere else where they can pay taxes to their local government not yours.
Bill D

[Jim Koepke]

I'm only guessing here - but - I guess you missed the part where I said paying property taxes are a cost of doing business - just like having insurance. You could argue successfully that I don't really pay the taxes, I just pass the cost along, but, that's true of every business. You literally can't tax a business of a professional.


Public services are funded by local property taxes for the most part. I pay property taxes on 7 different properties - plus - since I only reside in one of those, I pay the max for the other 6.
In other and plainer terms - I contribute 7 times to the public services that nearly everyone else only contributes towards once.
Did you catch that? I pay 7 times - others pay 1 time - now pray tell me, how does that become me having a full suite of those services that "someone else" paid for?

You are right, something was missed. My thought process was focused more on you complaining about having to, "contribute 7 times to the public services that nearly everyone else only contributes towards once." Then you say it is passed through to others.

I must have been distracted by all the complaining about passed on costs or not being able to figure out how to invest in stocks without having to pay taxes at a lower rate than earned income.

My taxes go through an accountant. We take our paper work in, I go to the hardware store next door and shop for an hour or so and go back, sign the papers and it is done. Life is good, even if taxes have to be paid.

jtk

[Rich Engelhardt]

Let’s not forget that it’s folks like Rich, investing, that allow folks who can’t afford to purchase a home the ability to rent one. That only happens with an investor risking their capital.Brian - thank you. That's exactly how it is. We furnish a house so a person can have a home. Some of our tenants prefer not to take on the role of home owner and some others are saving towards a house of their own.


You are right, something was missed. My thought process was focused more on you complaining about having to, "contribute 7 times to the public services that nearly everyone else only contributes towards once." Then you say it is passed through to others.I'm not complaining about anything. I'm just stating facts.
As the property owner - the property taxes fall on my shoulders. I rent the property out and part of the rent I collect goes towards paying those taxes.
HOWEVER - no rent collected doesn't stop the taxes. They still have to be paid. When a rental sits empty - whether it's from a deadbeat, a squatter or just because there's a lull in the market or the house needs work done, the bills still come in and as the owner, I have to pay them.
Back when COVID hit and people were collecting an extra $600 a week in unemployment & not paying rent & landlords not being able to evict them for not paying rent - the property taxes still had to be paid. When those same people also quit paying city provided utilities, guess who got stuck with those bills? (Hint - it wasn't the tax payers).

Our taxes go through an accountant also. We drop off the documentation and he does the taxes. A week or so later we get them via FedEx along with a bill for $550 - or whatever it's going to be this year. I'm betting it's more since everything has gone up.


I must have been distracted by all the complaining about passed on costs or not being able to figure out how to invest in stocks without having to pay taxes at a lower rate than earned income.Again - I'm not complaining about anything. Of course costs are passed along. That's basic business 101. You offer a good or service, you pass along any cost increases so you can stay in business. If there's no tenant, we get no rent - but - that doesn't mean the property tax stops - it means we have to eat the taxes until we get a tenant. When we do get one, yes, they will pay a little bit for the taxes we had to pay - in the form of a rent increase over what the previous tenant paid. Again, that's a fact of business life and anyone would be an idiot to complain about that.

The other part - not being able to figure out the best tax shelter from stocks is 100% true and on the money. I never sat down and really researched the stock and bond investments.
The why is very simple.
I have a very poor track record of investing money in money. I stuck $40k into something a dozen years ago & was lucky to get $28k out of it before it all went away.
I can't even complain about that because it was a hard - expensive lesson to learn.

[dennis thompson]

And here I thought I was discussing stocks:)

[Rich Engelhardt]

U r correct.

Sorry for the side trip.

[Andrew More]

The other part - not being able to figure out the best tax shelter from stocks is 100% true and on the money. I never sat down and really researched the stock and bond investments.

Let me make it easy for you. There is effectively no capital gains tax in real estate investing. In theory there is a tax, during a sale, but from a practical stand point most people do 1031 exchange. There also might be taxes on the rent, but most people depreciate the building quick enough to negate those as well. When they can't depreciate the building any more, you do an exchange, and the next guy starts again at a higher level. So on a practical level, you're left with property taxes.

For stocks you can in theory hold until the stock until you die, and pass it on, but the average lifespan of a company on the S&P 500 is 21 years, so you're likely going to sell at some point, at which point you're going to pay capital gains. You will also pay capital gains on any dividends you collect.

Finally, in an inflationary environment, having the leverage provided by a rental property is nice as long as you have rent coming in, something that happened for like 90-95%+ of buildings during COVID, despite the rent moratoriums.

And Rich is correct, he's providing a service, and taking a risk to do so. It's likely a higher risk than stocks because it's hard to diversify for most people, since you need a pretty good chunk of change for the down payment. Generally speaking mortgages on rentals is in the 20% range. There is also a lot more work involved, whether you hire it out or not. To compensate for that, most people target about 20% returns, though that's getting hard to achieve.

Finally, it's not so clear that rentals aren't the reason that prices are increasing, particularly AirBnB rentals, which bother me, because they're a hotel, but don't want to play by the hotel/motel rules. The rents extractable from an AirBnB far outstrip what most people can afford to pay to live permanently.

[dennis thompson]

U r correct.

Sorry for the side trip.

No problem, in fact as I read about your real estate investing and all the risks and work involved, I'm more convinced than ever that real estate investing is not for me, despite the fact that EVERY SINGLE DAY my wife tells me we should be investing in real estate:)

[Edwin Santos]

No problem, in fact as I read about your real estate investing and all the risks and work involved, I'm more convinced than ever that real estate investing is not for me, despite the fact that EVERY SINGLE DAY my wife tells me we should be investing in real estate:)

If your wife feels strongly about it, you could consider a REIT in your stock portfolio and then you will have indirectly invested in real estate. Or a homebuilder. Or a publicly traded mortgage lender like Rocket (RKT). There are REITS for pretty much every section and subsection of real estate.
I have wondered what the future holds for Class A office given the trend toward permanent remote working. Maybe at lease renewal time many companies will choose to downsize their office spaces and landlords will see an increase in vacancy.

[dennis thompson]

If your wife feels strongly about it, you could consider a REIT in your stock portfolio and then you will have indirectly invested in real estate. Or a homebuilder. Or a publicly traded mortgage lender like Rocket (RKT). There are REITS for pretty much every section and subsection of real estate.
I have wondered what the future holds for Class A office given the trend toward permanent remote working. Maybe at lease renewal time many companies will choose to downsize their office spaces and landlords will see an increase in vacancy.
Edwin
They say rents are rising fast so an apartment REIT might be a good option. I agree the office space commercial reits could have trouble, particularly in the big cities where there are also crime problems. I’m in NJ now but I worked in NYC and took the subways every day, often at 11 PM. I wouldn’t want to be doing that today.
I’ve thought about Reits, or a reit etf like Vanguards VNQ, but never bought one, my wife watches too much HGTV and when she says real estate, she means a house, preferably one we fix up and flip. “we fix up” means she picks out the colors and I do the painting. I want no part of that.:)

[Jim Koepke]

One person in my life suggested investing in real estate "in the way of progress." At the time they were talking about the open land between Vallejo and Sacramento in California.

There are sure to be other areas expanding their "bedroom communities."

Back to stocks, there are many strategies. The ones that do not usually pan out are the ones for making a quick fortune. Solid dividend paying companies may be boring, but there is something to be said about a large corporation like Amalgamated Big Company paying a dividend every quarter, year in and year out.

jtk

[Bill Dufour]

If they pay a dividend you have to pay taxes on that every year. If they just let stock prices grow you only pay taxes when you want to sell.
Bill D

[Andrew More]

REITs are interesting, but they have started trading in a manner similar to stocks, perhaps because at the end of the day they're essentially a company with a particular product in a particular field. They do tend to pay higher dividends because of the legal requirements of being REITs, but for diversification, it might be better to actually own and manage the property yourself.

[Edwin Santos]

Edwin
my wife watches too much HGTV and when she says real estate, she means a house, preferably one we fix up and flip. “we fix up” means she picks out the colors and I do the painting. I want no part of that.:)

I'm with you on this for sure.

Personally I don't think owner occupied residential real estate is that great an investment most of the time for a simple accounting reason. Most people don't have a basic accounting background, and what they do is lock in their minds the purchase price of their house. Then one day when they sell it, they take the sales price, subtract the purchase price and in their minds they say hey, I made $x.

What they never do is consider (i) the total property taxes they paid over the duration (ii) renovation and major repair costs (iii) carrying costs like accumulated mortgage loan interest (adjusted for tax deduction if you like) (iv) selling costs i.e. realtor fees, escrow fees, and other costs like termite treatment, appraisal fees and any other costs unique to the jurisdiction.
If you consider all these costs as costs that ran with the asset, and then you deduct them from the return analysis, it usually becomes a lot more modest than it seemed at first blush. I don't think they mention things like this on HGTV.

As a comparison, if you buy an investment like a stock or a bond, you have none of these costs so the return analysis is less deceptive. And these days the selling costs are negligible, even zero, not to mention liquidity and speed. Plus a bond is paying income, as is a dividend paying stock.

Rental real estate is a different animal, and I've always felt it mostly depends on the combined factors of the rent market and the interest rate environment, both of which have been favorable in recent years. Going forward who knows.

I have a concern that at some point the baby boomer housing inventory may create excess housing supply that the subsequent generations will not absorb all at once. But that's probably not for a little while. Incidentally, I also think some of our labor shortage issues are from the large segment of boomers whose retirement was accelerated by the pandemic.
A large segment leaving the workforce over a compressed time period can definitely create a labor shortage. This was aggravated by a significant drop in legal immigration starting in 2016 due to change in policy. Historically the legal immigrant pipeline has been a sizable feeder to the US workforce. Sorry for the digression, but all these kinds of demographic trends are worth considering in thinking about your investments IMO.

Edwin

[Andrew More]

What they never do is consider (i) the total property taxes they paid over the duration (ii) renovation and major repair costs (iii) carrying costs like accumulated mortgage loan interest (adjusted for tax deduction if you like) (iv) selling costs i.e. realtor fees, escrow fees, and other costs like termite treatment, appraisal fees and any other costs unique to the jurisdiction.
If you consider all these costs as costs that ran with the asset, and then you deduct them from the return analysis, it usually becomes a lot more modest than it seemed at first blush. I don't think they mention things like this on HGTV.
I agree with you on this. I've been running this type of analysis on rentals that are available in the local market and seeing very low returns, to the point that I'm not interested in buying a rental property right now. OTOH you seem to have left out appreciation, tax advantages, and the ability to diversify.



Incidentally, I also think some of our labor shortage issues are from the large segment of boomers whose retirement was accelerated by the pandemic.
A large segment leaving the workforce over a compressed time period can definitely create a labor shortage.
This is probably true, and if so might make for a tailwind for stocks moving forward. It would also explain the large drop in the labor participation rate.
475963

[Greg Funk]

Personally I don't think owner occupied residential real estate is that great an investment most of the time for a simple accounting reason. Most people don't have a basic accounting background, and what they do is lock in their minds the purchase price of their house. Then one day when they sell it, they take the sales price, subtract the purchase price and in their minds they say hey, I made $x.By owner occupied real estate I assume you're talking about whether or not to own vs rent your principal residence. A significant advantage of investing in your own home is the high degree of leverage that's possible. Most new homeowners start out with 25% or less as an investment. It's a relatively low-risk method of investing and in most locations outperforms the stock market. Even if the average rate of return from real estate is less than the stock market you get that return on your own money plus the borrowed portion.

There generally isn't a big delta between Mortgage Interest and Tax payments vs Rent.

[Edwin Santos]

Most new homeowners start out with 25% or less as an investment. It's a relatively low-risk method of investing and in most locations outperforms the stock market. Even if the average rate of return from real estate is less than the stock market you get that return on your own money plus the borrowed portion.

There generally isn't a big delta between Mortgage Interest and Tax payments vs Rent.

Over an extended period, say 30 years, or even better, 100 years, the average appreciation for single family homes in the US has been between 3 and 4% annually. The average stock market return over an extended period has been 9-10%.
However it's important to consider the non-financial benefits of home ownership. Quality of life, enjoyment, pride of ownership. But over time, on a pure investment analysis it is hard to make a numbers case that a home is a better investment than a diversified stock portfolio.

I do recognize however that the past two years have seen abnormally high rates of appreciation in homes. Some say it's a new normal. Others think it's an aberration like what happened in 2005-2007 with rapidly escalating home prices. If it's an aberration, then there may be a period of low or negative appreciation during which prices could revert back to the mean.
Historically low interest rates help a lot.
Leverage does offer opportunities but it also presents certain risks. Milton Friedman famously said "there's no such thing as a free lunch".

For those of us over a certain age, it is a complete departure from decades worth of normal to hear about 5-10x stock market returns and home prices increasing 30%-50% in a year.
Is it cause for celebration or cause for concern?

[Bill Dufour]

The return value of home ownership vs stocks ignore one obvious expense. If you use that money to buy stocks instead of buying a house you have to pay rent, forever. Buying a second house is different.
Not being called at 2:00 Am to come fix a problem in a rental is worth it to me.In my old neighborhood there was a rental house at the end of the block. The landlord charged $50-100 a month more then the other houses. It had a dirt floor garage and a swamp cooler. Tennants lasted less then a year before finding something better at a lower price. He lost 1-3 months rent a year which was way more then the extra 500-1000 a year higher rent.
Bill D

[Michael Drew]

Can someone explain to me how to avoid round trip rules? I sold some stocks Feb 23rd that were down over 50%. I originally bought them with some faith in the company and they would grow - but they tanked. Figured I might as well sell them and take the tax loss, then reacquire after 30 days and hold them. But now I'm wondering if I can actually do as I had planned and sill claim the losses on my 2022 taxes? If I buy the same stocks again, say tomorrow, would those buys be considering "round trips", and ineligible for taxes losses?

[Jim Koepke]

Can someone explain to me how to avoid round trip rules? I sold some stocks Feb 23rd that were down over 50%. I originally bought them with some faith in the company and they would grow - but they tanked. Figured I might as well sell them and take the tax loss, then reacquire after 30 days and hold them. But now I'm wondering if I can actually do as I had planned and sill claim the losses on my 2022 taxes? If I buy the same stocks again, say tomorrow, would those buys be considering "round trips", and ineligible for taxes losses?

It sounds like what you are asking about is called a "wash sale."


The wash-sale rule is an Internal Revenue Service (IRS) regulation that prevents a taxpayer from taking a tax deduction for a security sold in a wash sale. The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss and, within 30 days before or after this sale, buys a "substantially identical" stock or security, or acquires a contract or option to do so.

You should talk to an accountant or your tax preparer before doing this.

Besides February 23rd to March 24th is not 30 days.

jtk

[Michael Drew]

It sounds like what you are asking about is called a "wash sale."



You should talk to an accountant or your tax preparer before doing this.

Besides February 23rd to March 24th is not 30 days.

jtk

Yes, Wash is what I'm trying to avoid. I was actually wondering if it's 30 days or one month. Good input on that clarification!

[Bill Dufour]

It is 30 days but.... that is 30 days on both sides so it may be 60 days.
I am not sure how they count days so you may need to wait 31 days to make sure.
Bill D

[Bill Dufour]

You also have to determine when the transactions are actually dated. If it is done online after 1:00 PM it will be done no sooner then the next market day. It can take several market days for stock transactions to actually be logged into the books.
I generally allow 3 market days for the transaction to clear and be reflected in my account. So If I sell some stock then transfer the cash into my bank account I allow six week days for it to get there and be available to spend.
Bill D.

[Jim Koepke]

It is 30 days but.... that is 30 days on both sides so it may be 60 days.
I am not sure how they count days so you may need to wait 31 days to make sure.
Bill D

You can not buy a stock that has dropped in price and then sell shares in the same entity that were previously owned within 30 days to claim a loss for taxes. Nor can shares be sold for a loss then rebought in less than 30 days.

There was no mention of business days or holidays and weekends not being counted. It also says 30 days, not one month.

It seems the idea is if the stock is only having a short term dip it should be held, not sold to create tax avoidance schemes.

Not being an accountant or a tax professional, my advice is to ask an accountant or a tax professional.

jtk