5 ms·
Taxes are on gains, but they are far from irrelevant when comparing buy-and-hold strategies with those involving many transactions. An x% tax effectively reduce
by CaptainNegative 4y ago
Taxes are on gains, but they are far from irrelevant when comparing buy-and-hold strategies with those involving many transactions. An x% tax effectively reduces net profits by x% every time you sell, meaning that it eats into the compounding rate (at the buy-sell interval), which is fundamentally different from eating into your "simple" profit as it effectively would for buy-and-hold.
To give some concrete numbers, imagine you want to invest $1000 for 10 years with 10% APY with gains taxed at 20%. Buy-and-hold nets you $1000 * 1.1^10 = $2594 pre-tax, and $2594 - (2594-1000)*.2 = $2275 post-tax. Cashing out and immediately buying back in every year nets you the smaller $1000 * 1.08^10 = $2159 post-tax.
- endisneigh 4y agoWhat you’re saying isn’t relevant because the HODL philosophy is that you believe bitcoin will moon, therefore you can buy all dips and cash out inevitably when it moons.
- junofan 4y agoNo. It means don’t sell in a bear market [1]. From the originator, GameKyuubi: > You only sell in a bear market if you are a good day trader or an illusioned noob. The people inbetween hold. In a zero-sum game such as this, traders can only take your money if you sell. [1]: https://www.investopedia.com/terms/h/hodl.asp https://www.investopedia.com/terms/h/hodl.asp
- endisneigh 4y agoI’m familiar, which goes back to to my original point and post.