As both the United States and Canada are in an election year, the discussion on taxes is once again been rehashed. More people than ever are owning stocks. Last we heard this number was approximately 110 million North Americans. A large issue being raised by this group is regarding a tax that affects your investing profits - the dreaded capital gains.
Lets take a quick look at how the capital gains tax works.
Also note, you do not need to pay capital gains tax until you sell your investment and realize the returns. The whole problem starts with the rules of compounding, this is the ability of an asset to generate earnings that are then reinvested in order to generate their own earnings. Bobby ST isn't that patient, he needs some excitement. While not a day trader, he likes to make one trade at the end of each year. Had both of them been earning the same rate of return the results would be even more staggering.