How Making Short-Term Investing Decisions Right Now Can Go Against Your Long-Term Interests
There's a lot of noise in the stock market. You have daily price fluctuations, quarterly earnings calls, speculation, and a smartphone that makes it all too easy for this to be in your face at all times. The problem with taking in so much of the stock market noise is that it can cause you to make short-term decisions that go against your best long-term interest, and that's never a good thing.
A common mistake people make is panicking when stock prices begin to drop during bear markets and prematurely selling their shares -- to cut their "losses" early or take a profit while they can. The thing about losses in your portfolio is they're unrealized losses, meaning they only exist on paper. If you buy a share for $100 and the price drops to $80, you've only lost $20 if you sell it. If the price increases to $120, that drop to $80 becomes irrelevant.
If you're panic-selling to hurry and lock in profits before prices drop further, the one thing you don't want to do is forget about Uncle Sam because he definitely won't forget about you. Selling stocks for a profit will trigger a tax bill. If you held the stock for less than a year, it'd be taxed at your income tax rate. If you held it for a year or more, it'd be taxed at a more favorable capital gains rate. Here are the capital gains rates for 2022:
Source Fool.com
