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That could mean kicking back anywhere from 25% to 39.6% to Uncle Sam. Selling stocks you've held for less than a year triggers a short-term capital gain, taxed as ordinary income. That's because the one-year mark is a line of demarcation for the tax man. The FANG stocks – Facebook,, Netflix and Google (Alphabet) - had a great run in 2015, with returns ranging from 34% to 134%, but from a tax perspective any investor who bought last year and eyeing the exits wants them to keep climbing. Think of investing like grocery shopping - there’s a reason you go to the store with a list instead of just deciding what to buy based on price tags.Ĩ) Taxes Can Take A Bite Out Of Your Profits While triple-digit price tags might cost too much for a new investor with limited funds, loading up on 100 $1 stocks isn’t necessarily a better strategy. The price of a single share is not the right number to evaluate when deciding if a stock is a good buy or not.

A stock that looks cheap at 10 times earnings can go to 5 times in a flash, and a flashy tech startup that looks pricey at 3 time sales can easily jump to 6 in a heartbeat.ħ) A $100 Stock Isn’t Expensive And A $5 Stock Isn’t Cheap But there is no single number that divides good stocks from bad ones. Professsional and amateur investors alike have their favorite measures of growth and value, from price-earnings ratios to dividend yields and profit margins. (See 'Why Kevin O'Leary Loves Dividends.') That's why he says he'll never own a stock that doesn't pay at least some of its profits out to shareholders. Shark Tank investor Kevin O'Leary is fond of a statistic that shows the bulk of the S&P 500's returns over the years have come from dividends, not price appreciation. Just ask owners of Kinder Morgan, which slashed its quarterly payout by 75% in December. A word of warning though – rich dividends that look too good to last often don't. Why? Because Apple paid out $2.03 in dividends over the course of the year.ĭividend-paying stocks aren't immune from declines, but they do offer a degree of insulation that others don't. That's an 11% decline, but investors who owned the stock all year lost just 3%. Years of mismanagement in the airline industry led to a string of bankruptcies in the 2000s, but the resulting merger wave made American Airlines, United Continental and Delta Air Lines more competitive and poised to benefit from trends like plunging fuel costs.Īpple' s share price dropped from $110.38 to $105.26 in 2015. Transportation stocks like airlines and railroads have gone through long out-of-favor stretches, only to churn out considerable gains when economic conditions and industry dynamics align. Trying to buy or sell shares based on a quarterly earnings report or an economic data point is a game for automated trading platforms, not the average Joe.īetter opportunities come when a stock or sector is dismissed by the market and languishes despite steady economic results that will produce a long stream of profits. Taxes aren't the only reason short-term trading is a loser's game for most investors. exchanges, can be found online through the SEC's EDGAR system. public companies, and foreign companies that list on U.S. Regulatory filings will also detail any senior management changes, acquisitions, and stock transactions by executives or board members.Īll filings for U.S. The annual 10-K includes the most information, ranging from quarterly and annual financial numbers to descriptions of business lines and management commentary on growth opportunities and costs. There's no better starting point than the regular filings public companies make with the SEC, which are required to detail everything from company finances to potential conflicts and risk factors. While some investors might think they have a sixth sense for finding good companies, the rest of us have to do our homework. While long-term gains for stocks at large have historically been a safe bet, individual companies are inherently riskier.

Some of the stock market's best investors over the long term – Warren Buffett, Carl Icahn and their ilk – have placed their biggest bets on companies out of favor or during times of market stress.

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Just three examples of story lines once taken as gospel that have been shot full of holes.Ī word to the wise: the conventional wisdom isn't always wrong, but it frequently has terrible timing. Oil prices at $100 a barrel are here for the long haul Alibaba is a world-beating juggernaut that can't be stopped ESPN is immune to the shifting sands of the cable business and it's ability to mint money for Disney will never be in doubt. 2) There Is No Such Thing As A Sure Thing