Investing, Market, Stock, Implications, risks


Question by music:

What are the tax implications of investing in the stock market? What are the risks?

I'm am 20 and in college, and thought I would invest some money in the stock market. I am new to stock investing and am planning to invest a 0 first. How do taxes come into play with stock investing? What companies should I invest in currently?




Best answer:

Answer by Hubris252
With that small amount of money it would probably be best to find a high-yield savings account and build up your investment capital. Once you have about 00 you can put it into an index fund (small and mid cap do best in a recovery). When you have around 00 then you can start buying individual stocks. You need that much money in order to be able to have meaningful amounts invested over a diversified portfolio of 5 or 6 individual stocks.

Taxes come in to play when you sell shares, you will have to pay capital gains taxes on any profits you make when you sell. How much your capital gains tax is depends on what tax bracket you are in. If you own the stock for less than a year you pay regular federal income taxes on your gains, if you own the stock for over a year then you pay the long term rate. If you are in the bottom 2 tax brackets then your long term capital gains rate is 0%, if you are in the top 4 brackets then your long term capital gains rate is 15%.

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