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If you sell you pay taxes on the gains, so you are probably better off borrowing against your investments if you need cash, since borrowing isn't a realization
by bdowling 10y ago
If you sell you pay taxes on the gains, so you are probably better off borrowing against your investments if you need cash, since borrowing isn't a realization event for tax purposes.
Investments that pay dividends aren't as good for individuals since the dividends are taxes at ordinary rates.
- wfunction 10y ago> you are probably better off borrowing against your investments if you need cash I don't understand what that means. Whom would you be borrowing from? Where would the cash be coming from?
- supersaiyanverx 10y agoYou would borrow from the bank, using your stock holdings as collateral. Not as easy as he makes it sound, but not unheard of if you have even a meager amount. Say, at least 50k.
- rbcgerard 10y agoYour broker https://www.interactivebrokers.com/en/index.php?f=interest&p=schedule2 https://www.interactivebrokers.com/en/index.php?f=interest&p...
- wfunction 10y agoWhat happens if your stock goes to zero in the meantime while you've borrowed against it?
- agermanov 10y agoBroker will sell your stocks to prevent it's losses.
- wfunction 10y agoAlso, wouldn't this mean you have to pay interest on the ENTIRE amount of the loan, as opposed to tax on just the gains? So if you have $1000 that means at 2% interest (I assume that's yearly) you're paying $20/year, whereas if your stock went up 5% (= $50), that means you'd be paying (say) 25% of that, which is $12.50. So it should be only better if either have a high tax rate or your stocks /really/ increased in value (not just kept pace with inflation).
- agermanov 10y agoThat requires 110k$ and you can't just take money with that rate, it's margin. So you should have more than 110k$ to take some of that money and replace them with margin.