Financial question

Totally non-partisan, non-religious question: Say I buy $500 worth of stock at $1 per share. Then the stock price goes up to $2 and I sell. So according to the financial site, who submits data to the IRS I presume, I’ve made $1000 (thousand put into the holding account from the sale - I’m guessing that’s how companies like etrade do it). But I really haven’t, I’ve only made $500. Anyone know how that works for tax purposes?

Depends if the income or the capital is taxed. your profit is 500, but your capital is 1000.

I haven’t traded in a while, so I forget the name of the form, but the $500 is called the “basis”. You list all sales for the year, then subtract the basis. It also matters if it was a short or long term capital gain. The data should be on your trading site, but it’s up to you to fill out that form correctly.

I have a pretty measly stock “portfolio” (oh god I’m sounding like one of the financial wonk types!) so I wonder how big investors do it, like if someone had hundreds of different stocks. Seems like alot of work. I’ll have to look into what tax form it is.

morgankane01 - Not sure what you mean by income or capital is taxed. Who determines which?

I don’t know Tax laws in USA, but in France it is basic :slight_smile:

You have to tax individuals, you may tax either what they earn or what they have. In the fist case, you tax the income, in the second case, you tax the capital.

Un investor has shares of a value of 500. During the fiscal year, he buys, he sells. At the end of the year his shares have a value of 1000. It means he owns 1000 and his capital gain is 500.

He can either, depending the law, be taxed on the 1000, or on the capital gain, or both !

I don’t gamble, so I can’t tell you. I consider the stock market a form a gambling. Once I lost $20 in 20 minutes divided among 4 different games at a casino. I quit. With my luck, the bottom would fall out of whatever stock I bought.

I share your feelings, but specialists tell you that whatever happens, historically, if you look on a very long period, investors who buy with reason never sell are always winners, except if they are caught in a speculative bubble. But it means they did not buy reasonably.

I think it’s still a waste of money, just as playing the lottery is or going to a casino. It’s all part of Corporate greed and that’s why they want you to invest- to feed the greed.

Oh it’s definitely gambling, cloaked in fancy lingo, unless you’re in a position to manipulate the share price via inside info or action, which many have done. Think of it, what’s the difference between these two: I bought X shares at $10 per share. Now the share price is $15. Should I sell? What if it goes up right after I sell? Better hold. What if it goes down? Better sell. I just pulled the level and got three gold coins (whatever counts as winning on the slots), and got it three times in a row! Better pull the lever again, what if I get three gold coins again? Wait, what if I get nothing and lose? Gambling.

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Stock market is not a lottery for everyone !

[Dow Jones - DJIA - 100 Year Historical Chart | MacroTrends]

January 1920 : 1 154

November 2021 : 34 483 = January 1920 index 29,88

Price index : 19, 4 in December 1920, 258, 811 in December 2020 : x 13, 34

Win 2,23

[Consumer Price Index Data from 1913 to 2021 | US Inflation Calculator]

Are you going to be around in 100 years to collect? Will there still be a Dow Jones 2120? I don’t call that a win if you’re dead or there is no more Dow Jones in the future. It’s still a gamble and Star Trek medicine that helps us live well into our 100s isn’t here and probably won’t be for a long time to come. So it’s a loss for you personally, but if you can will it to grandchildren or great grandchildren, they might win.

Capitalists think long term. Even if they don’t get the whole profit, they get their shares. And the capital gives income.

Mriana, you and me will never be rich…

I’m not looking to be rich. Just comfortable.

Long term, maybe. But think of the poor slobs who retired around the 2008 timeframe when the market plunged. People lost hundreds of thousands in value in their 401ks. Gambling. (Of course smart investors won’t put all their eggs in one basket, but unless you have numerous large baskets, you’re gonna be out of luck if the market has one of it “temporary” crashes.)