If you enjoy investing in the stock market every now and then, especially if you consider yourself none too bad at it, and definitely before you start telling your friends what to invest in and what not to, we would like to point out an article in Businessweek dealing with taxes.
Here they explain how to see (based on the state in which you reside) if it’s worth investing in stocks or if you should stick to non-taxed investments, like municipal bonds. Remember, the more often you trade, the more often you’re liable to be taxed. Also remember that any deductions you may have (here we’re talking to you rich folks) may be voided if your income comes from untaxed munis rather than stocks. And remember there are many other variables that come into play, each in its own different way depending on your level of diversification and allocation.
In short, it can get complicated. This is why tax advisors and financial consultants are paid what they are. On the other hand, it would have been nice if Businessweek had included a calculator to figure out these allocations, rather than a picture with some generic tax rates. It seems that if you could set up a calculator where people can enter their personal information and states of residence, it could spit out your real return. Then if you play around with the numbers you could figure out the optimal allocation.
If any of you have a knowledge of taxes, we’d love to work with you on this, and we’d be happy to give you full recognition.
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