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Anybody can participate in the market and take advantage of capital gains and write-offs (losses). I'm not following your logic. EDIT: Love that I'm getting do

Anybody can participate in the market and take advantage of capital gains and write-offs (losses). I'm not following your logic. EDIT: Love that I'm getting down voted for saying anybody can participate which is a fact.

danbruc 10y ago
Maybe we should simply have an economy where everybody lives on capital gains, nobody has to work, and finally everybody will be happy.
- deleted 10y ago
  [deleted]
justicezyx 10y ago
Gambling always favor the party with more capital. The current market is cultivated more as a place for gambling than meaningful investment avenue for advancing economies. That's where the sentiment come from. No one is complaining the access to the market is lacking. Rather, all are forced to join a market that has obvious flaws that the rich and powerful are not interested in fixing. And if not join the market, you stand to lose for sure.
tw04 10y ago
>Anybody can participate in the market Except for people living paycheck to paycheck because they're on welfare making minimum wage. In other words about 20% of the population, if they're smart with their money, can participate in the market.
- nodesocket 10y ago
  Sorry, anybody can participate, even people living paycheck-to-paycheck. For example, instead of buying that $5 Starbucks, save up and buy a share of $SBUX which is currently at $54.53.
  - dpark 10y ago
    > even people living paycheck-to-paycheck. For example... save up and buy ... So your solution for living paycheck to paycheck is to simply not live paycheck to paycheck. It's surprising no one's thought of that before.
  - dyarosla 10y ago
    I don't think you understand the concept of paycheck to paycheck. Although it may be the case that some people living paycheck to paycheck spend outside their means on luxuries like brand name coffees, there are also those people for whom paycheck to paycheck is forced on them due to external factors. Now I didn't downvote you but I think those who did did so to hint that your perspective could use a reality check.
  - eeeeeeeeeeeee 10y ago
    Ah yes the "if only poor people would stop blowing their money on Starbucks" argument. You are either trolling or you are unbelievably sheltered.
  - rublev 10y ago
    When I was living paycheck to paycheck I could only dream of a fancy latte. But it meant not eating for the next 3-4 days, $5 goes a long way.
    - xapata 10y ago
      You can buy a lot of 10-cent ramen for $5.
  - dikdik 10y ago
    So, you've never met a poor person that's also responsible? While you probably are poor people at Starbucks, most of them don't go there.
  - danielhooper 10y ago
    Please travel more.
- briandear 10y ago
  Just 3% of hourly workers in the US make minimum wage which means that "20% of the population" is highly incorrect. https://www.bls.gov/opub/reports/minimum-wage/2015/home.htm https://www.bls.gov/opub/reports/minimum-wage/2015/home.htm
  - humanrebar 10y ago
    Only 63% of Americans are working or looking for a job. The rest are supported by others or the government.
eeeeeeeeeeeee 10y ago
Saying anybody can participate is as ridiculous as Republicans saying poor people will have "access" to health care without any concern of its affordability. You live in a bubble. You should go talk to some real people.
- briandear 10y ago
  Poor people do have access -- it's called Medicaid. Medicaid exists in all 50 states.
ouid 10y ago
you're getting downvoted for your comment being irrelevant to the discussion. If most of your income is salary, you will be paying a much higher effective tax rate than if most of your income is capital gains. The latter correlates with being wealthy.
- prostoalex 10y ago
  > If most of your income is salary, you will be paying a much higher effective tax rate than if most of your income is capital gains. Correct only for individual incomes above $165,000. Current long-term capital gains rate with ACA surcharge is 23.8%, and according to https://www.taxact.com/tools/tax-bracket-calculator.asp https://www.taxact.com/tools/tax-bracket-calculator.asp the effective income tax rate for a single individual goes above that at $166,000. Having any family or other dependents introduces new deductions, and so does contributing to an IRA or 401(k), extending that runway. This also ignores the fact that planning to generate stable income via long-term capital gains is akin to planning on generating stable income by consistently winning the lottery.
  - ouid 10y ago
    1) the lottery has a negative expected value, investment does not. In the long run, this is a qualitative difference. 2) That is federal income tax, you've missed state, medicare and social security, and are also completely discounting the fact that the capital gains rate is bounded from above by the income tax rate. 3) most importantly, 165000/year isn't very much money. It is plenty to generate personal wealth. Most of the actual income in america is made well in excess of 165k/year, and much of that income is in the form of capital gains. If you need a better breakdown, I can't do it better than this https://fivethirtyeight.com/datalab/the-top-1-percent-earns-a-lot-from-cashing-in-on-investments/ https://fivethirtyeight.com/datalab/the-top-1-percent-earns-...
    - prostoalex 10y ago
      The article you linked concludes that "the wealthiest 1 percent are an outlier: 36 percent of their income comes from capital gains". As the graph suggests, that number quickly decreases to 10% and 5% when the group encompasses the wealthiest 5% and 10%. So for those three groups the income not subject to capital gains tax constitutes 64%, 90% and 95%. This is before the capital gains are even broken down into long-term vs short-term (which are taxed at plain old income tax rates). I am still not seeing what led you to believe that the effective tax rate will be significantly lower. > That is federal income tax, you've missed state Mmm, okay. Well, I am not a CPA and not sure about other states, but California makes it easy by treating any capital gains (long-term or short-term) as income, so (at least for CA) the effective tax rate of someone relying on long-term capital gains will be pushed up, not down. I agree though that if some other states have favorable treatment of long-term capital gains, the numbers would look different. > medicare and social security Both are subjects to wage limits, and at $166,000 (which will be a higher value once the state tax is incorporated) we're well past those limits. > the lottery has a negative expected value, investment does not. In the long run But a capital gains requires a sale, which means the position has been exited, and there's no long-run. True, it might be a partial sale of an asset, and in some case the proceeds of a sale are invested into another position, but at this point you're pretty much betting the new assets will increase in value and be a candidate for a sale. Hence my lottery comment.
pfranz 10y ago
I'm not saying you don't have a point in your original post, but you should absolutely not use the stock market as your savings account. There's a reason it's recommended that you have 6 months of living expenses liquid. Yes, you're very likely to gain much more by investing in index funds. But "the market can stay irrational longer than you can stay solvent." If there is a stock market crash, that's likely to coincide with personal issues, like losing your job. Even if you can weather the market, having to pull out money at the bottom of the market will destroy your gains.
- nodesocket 10y ago
  Completely agree that the market should not be where you put all of your money without having liquid reserves. I'm not advocating that. Howerver as a long-term (> 10 yrs) strategy and assuming you also keep a pool of capital in a checking and savings account ETF's are the way to go if you just want to fire and forget.
- dlubarov 10y ago
  > There's a reason it's recommended that you have 6 months of living expenses liquid. Do you mean cash equivalents? Public stocks are liquid. Personally I think the 6 months advice is too conservative. If everyone calculated the damage inflation tax did to their savings account each year, probably more people would be willing to take a bit of a risk and invest their savings (or a greater portion of it).
  - pfranz 10y ago
    You're right, public stocks are liquid and I meant cash equivalent. There's a lot of variance on how much is recommended in an emergency fund. Most seem to say 3-6 months. I know if I lost my job I could cut down my living expenses and stretch it out. But if I had to move for a job, had an extended gap, or had to take a lower paying job I might have to dip into those investments prematurely. Having to cash out at the bottom of the market burns years of investments where it would have been better if you just held onto cash even if your interest rate is a pittance. Just like putting money into 401k is more than negated if you have to cash out early. Everybody has different risk tolerances and the amount needed in an emergency fund varies depending on a bunch of things (if you have debt, variety of incomes vs a single paycheck, gap between expenses and earning). I've never seen anyone actually do a study or source why they chose 3-6months--so it's really hard to argue for or against. I'd be curious if anyone has done a study. It hurts to have money just sitting there, but I'm not trying to eek out every penny. I really don't think all those extra risks are worth it. Keep your living expenses low and it won't be that much money ;)
edblarney 10y ago
"Love that I'm getting down voted for saying anybody can participate which is a fact." 'Anyone' can chose to play poker against people who are much smarter than them, who count cards, who use computers, who have 20 years experience and are buddies with the casino owners. Now maybe that game would not be theoretically rigged, but one would be pretty stupid to play it.
- adrianN 10y ago
  Investing in the market doesn't mean that you fight smart people. You could just buy an index fund and not worry about picking stocks.
paulddraper 10y ago
Yes, but only those with capital can have capital gains. If 0.2% of your income is available for investment, that will be different than if 20% of your income is available.

danbruc 10y ago

Maybe we should simply have an economy where everybody lives on capital gains, nobody has to work, and finally everybody will be happy.

deleted 10y ago
[deleted]

justicezyx 10y ago

Gambling always favor the party with more capital. The current market is cultivated more as a place for gambling than meaningful investment avenue for advancing economies. That's where the sentiment come from. No one is complaining the access to the market is lacking. Rather, all are forced to join a market that has obvious flaws that the rich and powerful are not interested in fixing. And if not join the market, you stand to lose for sure.

tw04 10y ago

>Anybody can participate in the market Except for people living paycheck to paycheck because they're on welfare making minimum wage. In other words about 20% of the population, if they're smart with their money, can participate in the market.

nodesocket 10y ago
Sorry, anybody can participate, even people living paycheck-to-paycheck. For example, instead of buying that $5 Starbucks, save up and buy a share of $SBUX which is currently at $54.53.
- dpark 10y ago
  > even people living paycheck-to-paycheck. For example... save up and buy ... So your solution for living paycheck to paycheck is to simply not live paycheck to paycheck. It's surprising no one's thought of that before.
- dyarosla 10y ago
  I don't think you understand the concept of paycheck to paycheck. Although it may be the case that some people living paycheck to paycheck spend outside their means on luxuries like brand name coffees, there are also those people for whom paycheck to paycheck is forced on them due to external factors. Now I didn't downvote you but I think those who did did so to hint that your perspective could use a reality check.
- eeeeeeeeeeeee 10y ago
  Ah yes the "if only poor people would stop blowing their money on Starbucks" argument. You are either trolling or you are unbelievably sheltered.
- rublev 10y ago
  When I was living paycheck to paycheck I could only dream of a fancy latte. But it meant not eating for the next 3-4 days, $5 goes a long way.
  - xapata 10y ago
    You can buy a lot of 10-cent ramen for $5.
- dikdik 10y ago
  So, you've never met a poor person that's also responsible? While you probably are poor people at Starbucks, most of them don't go there.
- danielhooper 10y ago
  Please travel more.
briandear 10y ago
Just 3% of hourly workers in the US make minimum wage which means that "20% of the population" is highly incorrect. https://www.bls.gov/opub/reports/minimum-wage/2015/home.htm https://www.bls.gov/opub/reports/minimum-wage/2015/home.htm
- humanrebar 10y ago
  Only 63% of Americans are working or looking for a job. The rest are supported by others or the government.

eeeeeeeeeeeee 10y ago

Saying anybody can participate is as ridiculous as Republicans saying poor people will have "access" to health care without any concern of its affordability. You live in a bubble. You should go talk to some real people.

briandear 10y ago
Poor people do have access -- it's called Medicaid. Medicaid exists in all 50 states.

ouid 10y ago

you're getting downvoted for your comment being irrelevant to the discussion. If most of your income is salary, you will be paying a much higher effective tax rate than if most of your income is capital gains. The latter correlates with being wealthy.

prostoalex 10y ago
> If most of your income is salary, you will be paying a much higher effective tax rate than if most of your income is capital gains. Correct only for individual incomes above $165,000. Current long-term capital gains rate with ACA surcharge is 23.8%, and according to https://www.taxact.com/tools/tax-bracket-calculator.asp https://www.taxact.com/tools/tax-bracket-calculator.asp the effective income tax rate for a single individual goes above that at $166,000. Having any family or other dependents introduces new deductions, and so does contributing to an IRA or 401(k), extending that runway. This also ignores the fact that planning to generate stable income via long-term capital gains is akin to planning on generating stable income by consistently winning the lottery.
- ouid 10y ago
  1) the lottery has a negative expected value, investment does not. In the long run, this is a qualitative difference. 2) That is federal income tax, you've missed state, medicare and social security, and are also completely discounting the fact that the capital gains rate is bounded from above by the income tax rate. 3) most importantly, 165000/year isn't very much money. It is plenty to generate personal wealth. Most of the actual income in america is made well in excess of 165k/year, and much of that income is in the form of capital gains. If you need a better breakdown, I can't do it better than this https://fivethirtyeight.com/datalab/the-top-1-percent-earns-a-lot-from-cashing-in-on-investments/ https://fivethirtyeight.com/datalab/the-top-1-percent-earns-...
  - prostoalex 10y ago
    The article you linked concludes that "the wealthiest 1 percent are an outlier: 36 percent of their income comes from capital gains". As the graph suggests, that number quickly decreases to 10% and 5% when the group encompasses the wealthiest 5% and 10%. So for those three groups the income not subject to capital gains tax constitutes 64%, 90% and 95%. This is before the capital gains are even broken down into long-term vs short-term (which are taxed at plain old income tax rates). I am still not seeing what led you to believe that the effective tax rate will be significantly lower. > That is federal income tax, you've missed state Mmm, okay. Well, I am not a CPA and not sure about other states, but California makes it easy by treating any capital gains (long-term or short-term) as income, so (at least for CA) the effective tax rate of someone relying on long-term capital gains will be pushed up, not down. I agree though that if some other states have favorable treatment of long-term capital gains, the numbers would look different. > medicare and social security Both are subjects to wage limits, and at $166,000 (which will be a higher value once the state tax is incorporated) we're well past those limits. > the lottery has a negative expected value, investment does not. In the long run But a capital gains requires a sale, which means the position has been exited, and there's no long-run. True, it might be a partial sale of an asset, and in some case the proceeds of a sale are invested into another position, but at this point you're pretty much betting the new assets will increase in value and be a candidate for a sale. Hence my lottery comment.

pfranz 10y ago

I'm not saying you don't have a point in your original post, but you should absolutely not use the stock market as your savings account. There's a reason it's recommended that you have 6 months of living expenses liquid. Yes, you're very likely to gain much more by investing in index funds. But "the market can stay irrational longer than you can stay solvent." If there is a stock market crash, that's likely to coincide with personal issues, like losing your job. Even if you can weather the market, having to pull out money at the bottom of the market will destroy your gains.

nodesocket 10y ago
Completely agree that the market should not be where you put all of your money without having liquid reserves. I'm not advocating that. Howerver as a long-term (> 10 yrs) strategy and assuming you also keep a pool of capital in a checking and savings account ETF's are the way to go if you just want to fire and forget.
dlubarov 10y ago
> There's a reason it's recommended that you have 6 months of living expenses liquid. Do you mean cash equivalents? Public stocks are liquid. Personally I think the 6 months advice is too conservative. If everyone calculated the damage inflation tax did to their savings account each year, probably more people would be willing to take a bit of a risk and invest their savings (or a greater portion of it).
- pfranz 10y ago
  You're right, public stocks are liquid and I meant cash equivalent. There's a lot of variance on how much is recommended in an emergency fund. Most seem to say 3-6 months. I know if I lost my job I could cut down my living expenses and stretch it out. But if I had to move for a job, had an extended gap, or had to take a lower paying job I might have to dip into those investments prematurely. Having to cash out at the bottom of the market burns years of investments where it would have been better if you just held onto cash even if your interest rate is a pittance. Just like putting money into 401k is more than negated if you have to cash out early. Everybody has different risk tolerances and the amount needed in an emergency fund varies depending on a bunch of things (if you have debt, variety of incomes vs a single paycheck, gap between expenses and earning). I've never seen anyone actually do a study or source why they chose 3-6months--so it's really hard to argue for or against. I'd be curious if anyone has done a study. It hurts to have money just sitting there, but I'm not trying to eek out every penny. I really don't think all those extra risks are worth it. Keep your living expenses low and it won't be that much money ;)

edblarney 10y ago

"Love that I'm getting down voted for saying anybody can participate which is a fact." 'Anyone' can chose to play poker against people who are much smarter than them, who count cards, who use computers, who have 20 years experience and are buddies with the casino owners. Now maybe that game would not be theoretically rigged, but one would be pretty stupid to play it.

adrianN 10y ago
Investing in the market doesn't mean that you fight smart people. You could just buy an index fund and not worry about picking stocks.

paulddraper 10y ago

Yes, but only those with capital can have capital gains. If 0.2% of your income is available for investment, that will be different than if 20% of your income is available.