Continuing from where we left:
Capital gains are something to be noted on an annual basis where your broker will issue a statement on how much profit you made. Same with capital losses.
It is better to have a list of stocks in different buckets:
- long-term hold bucket,
- shaky bucket if you are not sure about it
- watch list bucket if you are just following it for the time being
- short-term trades bucket : the stocks like Netflix or chipotle which are good for short-term trading where they swing wildly and can be used as means to deploy the swing trading methodology.
- stable bucket - like sector ones or REITs
In a way, I think people discount the notion of owning a home or a rental. Or they just carried away in emotions and they apply for the maximum loan possibly provided by a bank which is usually a jumbo mortgage and then they just simply buy a huge home with lot of stuff in it and then spend the rest of the lives paying them off in installments. Such cases aside, it is good to own a home and better off buying a single family home in possibly an area which is close to nature and parks and libraries. I don't advocate constant moving of homes or buying and selling of homes and certainly no flipping. If you have to move places due to job issues then you are better off finding a good property management company and then renting off said location. Living in a rental home has its own benefit .. major one of which is no maintenance and ease of moving to a different place later on. There is a massive debate on home vs rent. I think it is good to own a small home and then maybe rent it out and you could rent a home yourself or if your job is nearby, just stay in the home and enjoy some time there.
Beware of Leveraged ETFs - they are designed to go down over time. Just stay off them. Do yourself a favor and just delete any people or articles which talk about this. I turned down this noise and found that there is a pattern in the world of finance where people showcase one perspective and emphasize them till you say yes to it. It is pretty much similar to selling. Except that this product was never designed for you or me in the first place. Buying this product for even an institutional investors are a tough game and are outright banned in many pension companies as well as big investment firms. It is kind of illegal too and has a shady component in the way prices are reset.
Fanyboy approach: Believe it or not this things work. There are people who are companies fanboys. An example which I did a case study on and wrote a paper in my academic thesis was Apple. It is an understatement to say there are people who exclusively just prefer Apple products. Sometimes this fanboy mentality extends to their stocks. People who might not know anything about statistics might just use their emotions to buy Apple stocks and keep adding to it. In recent years, there has been no stopping Apple stock in its run to become the most valuable company in the world. Such people have hugely benefited from this run and they have seen their portfolio multiple several times in size. Astounding as this is, some of them are in for just apple and don't sell at all. Result is they are sitting on massive gains. So you know, work with something that lets you sleep well at night and the product or strategy that you understand pretty well.
Another such group is the dividend payers. Usually migrants from the bond world or new entrants from the bank world who are used to CD interest rates. They want steady flow of money like the retirees and don't want to be bothered with the daily fluctuations or want to sell daily. They just want to put some principle in a good basket of stocks and then get steady income off it. Dividend stocks buckets usually contains REITs, utilities, consumer stocks and blue chip stocks. Dividend payout is one of those thing where you do not want to invest in a company that is paying off huge dividends just like you do not want a company with massive fluctuations.
How do I sell? The types are market or limit mainly - do either of these which you are comfortable with. With easy availability of apps, market is easy to implement. I also use limit at times to just have a better limit rate. There are of course other options like stop and stop-loss etc. It all depend on your order type and more importantly your level of comfort and time available.
The way the market is structured and the stock priced or the bond priced, it is obvious that YOU do not matter way too much. In fact you are coming very late for this party where the price is already high and you are essentially getting the smaller gains. Of course, stay for the long-term and you are going to reap rewards. Places like Google or Facebook comes into mind. There is no point in putting way too much emotions in your investment. Dont see this as an extension of yourself or take it too personally. There is a difference between passion and personal. You can be passionate, understand your limits and outcomes and make an objective decision on the holdings. Tax loss harvesting is one variable in your equation or one tool that you have. A bigger thing is do you really want to sell this stock? Think objectively. A tax loss harvest will butter some of those losses but still you lost on a deal. The best outcome is always profit and then redeploy the profits to make more profits. This cycle is of course tough for all which is why data points that index funds often outperform the active funds thus making the case for investors to just invest in index funds. That is of course one of the strategies. Maybe core but not all of it. There are still fund managers out there who beat it. Consistently. Now if one of them gives you a good cut and a low expense ratio, then yeah go for it, otherwise manage it on your own.
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