January 1, 2009

Day trading futures – But the income-tax rate on capital gains is less than on income dividends, especially for a stockholder whose income is large.

So a selling stockholder pays less total income tax on this stock than he would on a stock that paid a larger dividend and showed less capital gain. Investment companies, in selecting common stocks for their portfolios, vary greatly in the degree of emphasis they place on income as compared to growth in value per share. So between two mutual funds with equally good over-all performance, the difference in the rate of income dividends and the consequent difference in a stockholder's income-tax bill can be substantial. Mutual funds differ also in how freely they sell stock from their portfolios and substitute stock of other companies. When stock prices are higher than formerly and a fund sells considerable stock from its portfolio, this causes the fund to have large capital gains, and the fund is legally obliged to pass these on as capital-gain dividends to its stockholders. Some funds pay capital-gain dividends at a rate several times as high as other funds.

Day trading futures – But the income-tax rate on capital gains is less than on income dividends, especially for a stockholder whose income is large.

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