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|This bulletin was published on Saturday,
Aug 7th, 1999 just for you.
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In this message you'll find I haven't referenced any of the email sent in recommending new stocks to add to the List. Due to larger than usual amount of email this week I've had to categorize it to some degree, instead of the usual "take it as it comes" format I normally use. My intentions are to send out another Update sometime this weekend which will include those emails.
I was emailed a question that came with a request to not post the sender's name and/or address (embarrassed I guess.) I thought after writing my response that it may be of interest to others so here it is minus the sender's I.D.
"Hi, I'm new to trading and would appreciate any help you could offer on determining the "break even" point. Is there a formula? My actual reservation is determining the amount of taxes to include in this calculation. I would hate to start trading taking 1/4 to 1/2 point sales to find out I'm actually loosing due to taxes
To start with lets simplify the term for typing purposes, by referring to the breakeven point as "BK." Yes I do have a very simple way to figure the BK, but first I'll comment on the tax portion of your question.
I don't figure in the taxes in any shape or form. The reason is this...what you pay in taxes is determined by the tax bracket you fall in. My wife has done taxes for many years and she advises me to not worry about it. Most people are in the 15% tax bracket, to be safe we'll say 20%. It's important to keep in mind that it's the profit that's taxed not the investment. However, I'm certain that you already know what federal and state tax brackets you fall into. So after you arrive at your profit just knock off the percentage that applies to you. The reason I say don't worry about the tax is because you never pay more in taxes than you make. It just seems like you do. So, if your profit is $2,000. and you're in the 20% tax bracket knock off $400. and drive on. For a profit of $100. subtract $20. and so forth.
One last comment on taxes: of course if you're pulling some really big bucks in and it's the end of the year, you may want to reconsider selling a huge lump of shares that you know is going to push you into a higher tax bracket. Whereas by waiting to sell for a few weeks would put the profit made off the sale into the next fiscal year for tax purposes. Of course if you find yourself in such a situation it probably would be worth your while to seek a little professional advice.
I figure the BK by working through how much the price is going to have to increase, for me to overcome the loss of the $40. for the commissions charged for buying and selling my chosen stock. This can be done by simply dividing $40. by the number of shares being purchased. Hence, 100 shares of stocks bought (regardless of the price per share or the total cost of buying whatever number of shares you've chosen) will have to increase by .40 just to hit your BK (40. divided by 100 = .40). If 1000 shares were bought the shares would have to be sold at a price .04 higher than what they were bought for, for you reach your BK. (40. divided 1000 = .04), simple...yes?
If after reading my above mentioned views on taxes and the BK you notice a flaw in my thought process, please send in your what you think is a better plan or explanation.
There's new Hoover's Update on the News Links page: http://members.tripod.com/LLH_on_Rolling_Stock/News_Links.html#Hoover's
Any guesses what happened to NETE! I ran a quote and see the ask price is about .93, but the chart still has it shown as being in the teens?
Today's Top News
PPOD plans pubic offering
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