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Break-even price = (Total Cost + Transaction Fees + Taxes) / Number of Shares. For example, if you bought 100 shares at $50 with $10 commission ($5,010 total cost) and will pay 15% capital gains ta...
Read moreCost basis is your original purchase price plus commissions and fees - it determines your taxable gain or loss. If you bought 100 shares at different prices (dollar-cost averaging), the IRS allows ...
Read moreMost states tax capital gains as ordinary income, with rates from 0% (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, Wyoming) to 13.3% (California top rate). State taxes stack...
Read moreThe S&P 500 has averaged about 10% annual returns before inflation (approximately 7% after inflation) over the long term since 1928. However, returns vary significantly year-to-year and by time per...
Read moreLonger time horizons (15+ years) dramatically reduce the risk of loss from stock market volatility. While stocks can lose 30-40% in a single year, no 20-year period has produced negative returns fo...
Read moreReinvest dividends (DRIP) if you don't need income and have a 10+ year horizon - the compounding effect can add 30-50% to your total returns over decades. Take cash dividends if you're retired, nee...
Read moreHigher potential returns come with higher risk (volatility). Stocks historically return more than bonds (10% vs 5%) but with more volatility (standard deviation of 15-20% vs 5-10%). Diversification...
Read moreTaxes create 'tax drag' that reduces annualized returns by 1-3% in taxable accounts. Holding stocks longer than one year qualifies for lower long-term capital gains rates (0-20% vs 10-37% for short...
Read moreNo. A stock split is purely cosmetic - it doesn't change the fundamental value of your investment. You have more (or fewer) shares, but each is worth proportionally less (or more). Your total inves...
Read moreNo, stock splits are not taxable events. You only pay capital gains taxes when you sell shares for a profit, and your cost basis adjusts automatically to the split ratio.
Read moreIt makes no difference financially. However, historically, stocks often see increased volatility and attention around split announcements. Some studies show modest positive returns post-split due t...
Read moreThe dividend per share adjusts proportionally to the split. If you received $2/share before a 2:1 split, you'll receive $1/share after. But with twice as many shares, your total dividend income rem...
Read moreForward splits increase shares and decrease price (2:1 split = 2x shares at half price). Reverse splits decrease shares and increase price (1:5 split = 1/5 shares at 5x price). Forward splits are u...
Read moreThe most widely used stock valuation methods include: 1) Price-to-Earnings (P/E) Ratio - compares stock price to earnings per share, useful for profitable companies. 2) Discounted Cash Flow (DCF) -...
Read moreValuation results should be interpreted as estimates, not precise figures. Here's how to use them: 1) Compare the calculated fair value to the current market price - if fair value is significantly ...
Read moreRequired inputs vary by method, but commonly needed data includes: 1) Financial statements - income statement, balance sheet, and cash flow statement for the past 3-5 years. 2) Current stock price ...
Read moreAll valuation models have significant limitations: 1) Garbage in, garbage out - valuations are only as good as your assumptions about growth rates, discount rates, and future performance. 2) DCF mo...
Read moreChoose your valuation method based on company characteristics: Use DCF when: 1) You have visibility into future cash flows (mature, stable businesses). 2) The company has a history of positive free...
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