I bet there's big money in ponies. They're starter horses for people who don't know if they want a horse. If you look at the number of 11 year old girls in the world, that's huge demand. [Reply]
Originally Posted by Rain Man:
I bet there's big money in ponies. They're starter horses for people who don't know if they want a horse. If you look at the number of 11 year old girls in the world, that's huge demand.
Almost half the population was an 11-year old girl at one point.. damn good thinking! [Reply]
What's good depends on your goal. That list is dividend aristocrats. Companies that have increased their dividend for 25 years. Typically a good sign of a well run company with possibly a moat. They don't all necessary pay a large dividend if that's what you're after.
I think Rainman has talked a bit about REITs. They can pay big dividends but they're unqualified so I don't touch them in my taxable account. I keep to indexes in my retirement so I don't end up a homeless bum.
Utilities tend to have good dividend payouts and are pretty safe. It's a defensive sector. [Reply]
Originally Posted by :
What you need to know
Both the Senate and the House have passed their own versions of the biggest tax changes of the last 30 years, and lawmakers are making progress on a joint bill through their committee work (reports from yesterday indicate they have a tentative deal). There is one particular part of the Senate bill that could disadvantage you as an individual investor if it makes it through to a vote -- the Mandatory FIFO Proposal.
Here is a brief primer on what this means and why it's important.
FIFO stands for "First-In-First-Out." It is a method for identifying specific tax lots when you have made your total investment over time -- using common strategies like dollar-cost averaging, dividend reinvestment plans, buying in thirds, or simply making annual lump sum contributions.
(By the way, senators, many of your constituents invest this way.)
The Senate's version proposes that all dispositions -- including sales, donations, and gifts of investments -- be on a first-in-first-out basis (FIFO). This means, if you want to sell, you must sell the oldest lot, which in all likelihood (especially after a very healthy 9-year bull market) has the lowest cost basis and the highest embedded capital gains. The proposal eliminates investor choice.
What does no choice look like?
Here's an example that might be common to Motley Fool investors.
Say you own 200 shares of Amazon that you purchased twice during the last five years: 100 shares at $300 per share in 2013, and another 100 shares at $700 per share in 2016. If you sell 100 shares at $1,100, then under the Senate proposal you would have to designate the older shares to sell and pay capital gains taxes on $800 instead of on $400.
Simply put, you wouldn't have the option to choose, for yourself and your family, which of your own shares of stock to sell!
Under current tax rules, individual investors have the choice of which tax lots to dispose of. This allows for such tax planning strategies as tax-loss harvesting and donating appreciated stock to charities.
It also provides individual investors the flexibility to create sensible financial plans that correspond to their circumstances by having the flexibility to take on a higher tax burden when the situation affords it and being more tax sensitive when times are tougher.
These tax-management strategies would be severely limited in the new tax world, and that could leave you and charities worse off.
Who could this hurt?
In a word: You.
More specifically, anyone owning stocks in a taxable account will be impacted.
Retirees will be especially hard hit, since many will have to sell investments in order to pay for medical expenses. Retirees typically have very long holding periods, with the oldest investments generally having the most gains built up over decades of buy-and-hold investing. Forcing retirees to recognize unusually high capital gains could increase the taxability of their Social Security Benefits, and lead to higher income-based Medicare premiums.
Investors that sell stock for a large purchase such as a home or a car are going to be especially hard hit, and the negative tax consequences could have a meaningful effect on consumption habits that would otherwise grow the economy (ahem, again, senators??)
Investors engaging in normal asset class rebalancing activities may place outsized weight on tax implications, resulting in poor investment decisions and an inefficient allocation of capital in our market system. That's the proverbial "tail wagging the dog" that we try to stay away from.
Investors may be tempted to get out ahead of changing tax rules and sell some later-dated tax lots while they still can. On the flip side, the looming tax bill on old tax lots may dissuade selling down a holding when it may be the sensible thing to do.
Yeah, the FIFO change would suck. Funds complained and the Senate changed it to only affect regular Joe's holding stock :/
That said as of last night it was currently not in the amended plan though it's still a work in progress. Id rather they make the 401k changes they were discussing than the FIFO change. The media took care of that though, hah.
Originally Posted by :
A rule inserted into the Senate's version of the tax bill was removed when House and Senate negotiators came up with a compromise bill, according to an executive at robo-advisor Betterment. The news was first broken by CNBC's Larry Kudlow, who cited four unnamed lawmakers. The FIFO rule would have forced investors to sell stock in the order they bought it -- "first in first out" -- possibly leading to high tax bills.
Under current law, investors looking to minimize their tax bills can choose which shares of a company they want to sell. That means that if they own Apple (AAPL) and need to sell some, they can sell the shares they bought last year instead of the ones they bought in 2003, which would come with a massive capital gains bill.
The Senate bill would have disallowed this maneuvering for many investors, forcing them to sell the shares they bought first. It would not apply to a "regulated investment company" like a mutual fund, or ETF. But individual investors who pick stocks would have been hit. Robo-advisors were spooked, because their ability to manage their customers' tax bills -- a big selling point for the industry -- would have been curtailed.
FIFO is not going to be part of the tax bill so no need to continue worrying about it. If it were even a chance you'd see an ass load of tax loss selling right now. Instead we are up 18 points on the SPX [Reply]
