Thursday, January 20, 2011
Don't Fear Taxes - Fear Your Fear
One of my biggest weaknesses as an investor is not following one of my own rules.
Don't let the fear of taxes wrongly affect your investment decisions.
Of course, you want to be aware of taxes. However, I've caught myself SEVERAL times not grabbing the profits from an abnormally quick run upward, because I didn't want to have to pay taxes during that year.
Every time I do that, my fears get answered, even though I don't pay taxes. I just lose on the ability to buy even MORE shares of the stock later. If you know that the price is too high for the moment, it will probably drop in another moment. Grab what you can.
You can always buy more later.
Also, if you have to pay taxes, that means that you have enough profit to PAY for those taxes.
Pay the $25 or so if you have a chance to pick up $100 or so. That STILL means that you have an extra $75 or so that you didn't have earlier. Take that money and run, even if you have to share if with Uncle Sam.
Common sense, right? Not for me or many other investors.