Your Questions About Money Making Stocks

Joseph asks…

If I make money investing in stocks with after tax income(not in IRA) do I pay income tax or capital gains?

If you max out a Roth, ESA, and the 401k match, what’s next? I want to start investing in stocks and mutual funds above these. Was wondering what kind of taxes I will owe on the money I make on these, capital gain or regular income?

John answers:

Any gains you have from investing in stocks/mutual funds that were made with after tax money would be subject to capital gains tax. If you hold the stocks/mutual funds for at least 1 year, they will receive favorable tax treatment and be classified as long-term capital gains.

Currently, the maximum amount of tax owed on LT Capital Gains is 15%.

ST capital gains are taxed at regular income levels.

Ruth asks…

Im 16 and want to make money from stocks?

is this possible? i occasionally do stock simulators, but i want to know if investing in stock is practical at my age? would it take a lot of my daily time up? where do i start?

John answers:

You CAN learn all about trading stocks, options, commodities, currency, bonds, investments and investing, in general, and trading.

Using a virtual trading platform, you should be able to try different strategies, adapt ,adjust and “hone” your trading rules, strategies and skills.

As far as YOU, personally, opening an account with an on-line broker or full-service broker is concerned, you must be at least 18 – MAYBE even 21.

Your parent[s] or guardian[s] may be able to open an account AND THEY would AND WILL be responsible for YOUR shortcomings and losses.

BELIEVE ME: As far as new traders and investors – no matter how young or old a person is – there are ALWAYS looses.

Discuss what you would like to do with those folks and see what they say or advise.

As I mentioned you can learn about trading and investing. As you read and do research about investing you could refer to this free site:
http://finance.yahoo.com

It’s recognized by Y! A as a “Featured Knowledge Partner”.

Http://investopedia.com is also a free site, recognized by Y! A as a “Featured Knowledge Partner”.

As you are doing research about the investments you are interested in, sometimes you’ll come across a financial or investment term you never heard before.. You can usually find excellent, easy-to-understand definitions of many financial and investment terms by going to Investopedia’s dictionary.

THIS IS NOT SPAM: You should also read books such as “Investing for Dummies” and other books for the beginning or “newbie” trader and investor.

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Nancy asks…

How the hel* do you make money in the stocks?

I am TOTALLY CONFUSED I need to know how to make money in the stock market. Thanks in advance

John answers:

Buy something like google and just hold onto it. Unless you’re a millionaire speculator that’s how everybody does it. For most of us stocks are an investment in the future, not a quick way to make money.

Steven asks…

How can someone make money in the stocks market by predicting the stock price will fall?

If I know a certain stock price will fall in the near future, how can I make money through this prediction? If you have seen Casino Royal, this is how the terrorists planned to make money, but they failed. However I didn’t quite understand how exactly they where going to make money by predicting the stock where going to fall.

John answers:

The last answer is correct. Also, you could up the ante and try options on the stock if it is optionable. Check with your broker, they will know.
An option is the right to buy or sell a stock at a specific price. They cost much less than working with the actual stock, however the leverage is much greater.
Check out optionsxpress for more info.
Good Luck!

David asks…

Why can’t you make money shorting stocks soon after their ex-div dates?

Don’t most stocks go into a slump after their ex-div dates?

If the ex div date on a mid-cap stock is January 1, and you short it on January 2, aren’t you nearly assured the stock will go down in the next few days?

What are the flaws of this technique? Does it even theoretically have a chance to work?

John answers:

No stocks don’t go into a slump after their ex-div dates, they lose the value of the dividend as they go ex-div, the loss is immediate. If a stock price was $100 today and you knew that if you bought the stock today, you would get a dividend of $1 but if you bought it tomorrow, you would not; why would you pay $100 for the stock tomorrow when you know it’s worth $1 less? The stock doesn’t take a few days to lose that dividend value, it’s immediate. Also when you short a stock, both the person you borrow the stock from and the person buying the stock from you are entitled to that dividend payment but the company only sent out one so you pay that dividend. If you shorted the stock BEFORE the ex-div date in expectations that it will go down by the value of the dividend as it goes ex-div, you become liable to pay the dividend out of your margin. Theoretically, it doesn’t have a snow balls chance in hell of working.

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