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If OP is youngish, and has all his ducks in a row, and this is truly $10k extra, assuming the other investments are conservative, I would give it to a reputable investment company and put it into higher risk, higher gain investments.
Seems a taxable account is the only option. I have a non-tax qualified account with LPL Financial, but can not pick my own stocks and not particularly happy with their performance.
I have one more question about how a taxable account is taxed; If I am fortunate enough to pick stocks that increase in value, will I pay tax on the increase even if I leave in the account ? or only if I withdraw it from the account ?
Seems a taxable account is the only option. I have a non-tax qualified account with LPL Financial, but can not pick my own stocks and not particularly happy with their performance.
I have one more question about how a taxable account is taxed; If I am fortunate enough to pick stocks that increase in value, will I pay tax on the increase even if I leave in the account ? or only if I withdraw it from the account ?
There's a lot of confusion here between assets, liabilities, investments, and expenses. A person shouldn't choose individual stocks without knowing exactly what these are, because these are the basics needed to understand a company's financial statements.
An asset is simply something of economic value. It doesn't necessarily generate income or appreciate in value. In fact, many assets depreciate over time because they wear out or become obsolete. Assets include not only stocks and bonds and savings accounts but real estate (regardless of whether you call it home), cars, and tools. An investment is an asset that is supposed to generate income or grow in value.
A liability is a debt, like a mortgage, credit card balance, or student loan.
A list of assets and liabilities is called a balance sheet. A balance sheet lists the values as of the last day of a certain period (usually a year). The difference between assets and liabilities is equity, or net worth for an individual or household.
An expense is money spent. If your mortgage is $100,000 and you pay $1,000 per month on principal and interest, your mortgage expense is $12,000 per year. A list of income and expenses is called an income statement, and it covers all your expenses over a period of time (usually a calendar year). The difference between income and expenses is called net income.
To take the example of a house, the house is an asset, the mortgage (if any) is the liability, rent (if any) is income, and repairs, maintenance, taxes and insurance are expenses. The value of the house and amount outstanding on the mortgage as of December 31 go on a balance sheet; the rent and expenses over the course of the whole year go on the income statement.
It's useful to mentally separate assets and liabilities from income and expenses. An income statement shows you where the money's going, and especially if you're spending more than you're taking in or if expenses are getting out of control. A balance sheet shows you, from year to year, how your net worth is doing. It helps answer questions like, is overall debt being paid down, or just kicked down the road? When might you retire? Can you afford an emergency? Are you making progress towards other financial goals or drifting along? What options do you have if your income is reduced or goes away?
Last edited by sheerbliss; 01-10-2017 at 06:10 PM..
I have one more question about how a taxable account is taxed; If I am fortunate enough to pick stocks that increase in value, will I pay tax on the increase even if I leave in the account ? or only if I withdraw it from the account ?
It's taxed when you sell that stock or sell that ETF or sell that mutual fund. But you don't withdraw the money. Typically you sell and the money moves from the stock into your cash/mutual fund holding account. Although you can withdraw if you choose - but it's the sale the is the taxable event.
Other taxable events are interest and dividends. For the dividends, you can choose whether to reinvest them in same stock or same fund or you can choose for them to be paid into your cash/money market account.
There are things you can do to make the tax owed smaller. Dividends pay a lower rate (in your 1040) so you might find high dividend investments to try to keep your taxes down. If you hold a stock long term (over 12 months), then you are taxed a lower rate than if you hold the same stock for under 12 months before selling it.
After maxing out a 401k and a roth with approximately 10k a year left to invest in stocks, what type account would be next on the list ? (Probably need more info. , but don't know what to add.)
One thing to check, if you haven't already done so, is see if your 401K plan allows you to make "after tax contributions" to your 401K. If yes, that's an option to consider. The IRS allows up to $53K/year total (including employer contributions) into the 401K. Depending on things like the funds you have to choose from, if they are good funds with low expenses, it can be a nice way to really boost your 401K over time.
<insert standard disclaimer that there are other options on what to do with monies to invest and this is only one option and is not intended to claim it's the only option to consider>
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