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How are dividends a tax burden? Or is this holding not in a “retirement” type of account?
For some the uncontrollable income can create problems ..plus dividends are 100% taxable …the same income draw from a portfolio only taxes you on the gain portion not the entire amount…
So dividends can be tax inefficient.
Non the the less 100% of the Dow and 80% of the s&p 500 pay dividends so they can be tough to avoid with large caps ..
The dividend flow I couldn’t control ended up costing me an aca subsidy
Even at lower capital gain rates as little as 2% in dividends can wipe away any lower tax advantage over the long term compared to having them in a retirement account
Dollar cost average weekly into a mutual fund that is currently on sale or out of favor. When stocks were setting records I was buying a few shares a week of long term treasury etf. I consider it being a contrarian Boglehead.
I am 70/30 at this time
Everything is cyclical. Buy it on sale and eventually it becomes the hot item which you can then take some profits from.
Taking profits is not something I’d consider to be holding long term. At least for me.
Maybe rebalancing would be the better term for it. All of my investments are in tax deferred accounts that I am too young to access.
Oh ok. Yeah I probably should pay more attention to that, but I don’t trust myself to make such changes. I don’t have a good track record for the times that I have made changes, so I let things ride. I had my Fidelity advisor review my entire portfolio recently and he said I was in good shape so I don’t worry about it too much.
Wow one year is not what I would consider a long term investment. Startup businesses are given 3-5 years to get traction, and that's a pretty short window for a business.
I recently purchased a multifamily. Well I traded up via a 1031. I decided to trade up rather than get out of the rental business for a number of reasons. Mainly the property is an inflation hedge and the gains are leveraged. It does kick off cash every month, and the tax advantages are nice, but the other big reason is that I am comfortable with it as an investment. I am temperamentally not a trader of anything; I like to buy and hold. This makes real estate an attractive asset class, and I already invest heavily in index funds via my retirement contributions. It's the "safe" part of my portfolio, as opposed to my more volatile stock holdings.
As to long-term investment, I expect to hold this property for at least ten years.
All my other investment money goes toward all-stock index funds.
I agree, 1 year is not long term in my book either, but it is to some folks. Long term means different things to different people, especially when discussing different asset classes. But it felt like a good starting point…by all means feel free to use your own definition of long term for discussion purposes here!
How are dividends a tax burden? Or is this holding not in a “retirement” type of account?
Younger high-income frugal people (like the folk hero Mr. Money Mustache) will annually save much more than the Roth-IRA and 401K limits. Likewise if you run a start-up company, sell, and receive a large pay-out. Or if you're an attorney who wins a spectacular case. Or an inheritance. Or wins from gambling.
These aren't necessarily my story, but regardless, the outcome is that most of one's net-worth ends up in non-retirement accounts. That's great for later in life, when the RMDs stay lower... but not so great in middle-age. Another example may be, if you lose your job. The paychecks cease, but the dividends keep coming, keeping you in a high tax-bracket, despite having no remuneration in exchange for labor. Again, not necessarily my personal example, but a consideration.
While I never hold a share that I won't sell at any price, I have a tendency to acquire favorites and twist really hard before selling them. Generally I want a market leader in an area that's growing or has a solid moat. Sometimes those don't exist for an industry. Sometimes those switch, for example, INTC was the long term favorite but now it is TSM. (Though I will trade many). Sometimes those switch because great companies have begun gutting themselves out for short term gains (IMO) like ITW or to some extent, MMM. The overarching theme is to be in the industries you expect to benefit in what is coming.
Meat - As the world gets richer, it's going to eat more meat. JBS may be king, but I have enough exposure to Brasil. TYS is a relatively safe long term play.
Semiconductors - This area has been growing forever and as everything gets smart, it will continue to grow. Plenty of room for multiple winners here, but TSM is the kingpin of Taiwan Semiconductor.
Search - Did you ever think about how few websites you ever just type in? GOOGL (not GOOG) wins for the US. Would love to trust BIDU's numbers for China and trade them, but communism makes it too risky for permanent hold.
Elevators - There's as much vertical track in this world as there is horizontal, but there's only a handful , of elevator manufacturers. OTIS, Schindler, Mitsuibishi, Kone, Thyssenkruppe and the dominant players. OTIS, as a result of UTX split, is now available. Recently sold mine but I'm always looking to time my reentrance there.
LMT - They arm half the world and are making a play at fusion. If the latter comes into existence, this will be the most valuable company in the world.
Banks - Currently I don't have a great play on this. Was WFC for a decade. Wasn't bothered in the least by the checking account scandal, but I really don't like some of the loans I've been seeing them make out here in SV. JPM seems to have the tech at the moment. We'll see who commands the next wave of transactional dominance. Too big of an area to sit on the sidelines for though.
Ok, wife says to stop talking so we can go to COST. Which is a pretty sweet company as well.
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