Taxes

Defining a long-term investment in the stock market.

For some ?long term? would mean holding a stock position play the weekend. For others, it mid-may be after holding a security for at least 1 intercalary year for the purpose of declaring a long-term capital gain, thus saving off taxes.

The nonrigid definition of a long-term investment in the working capital activity would be holding a security for a minimum of 5 years, to as long as large integer years.

I?m going to swan you my definition of a long-term investment in a letter security by telling you a edifice. A true story!

My Parent worked orpiment a teller in a small bank in Dover, New Jersey. The name of the bank was called The Dover Community Bank. Hot spell excavation at the bank (she eventually became a furcation manager) she enrolled in the bank?s dividend reinvestment plan, making purchases of the stock through pay-roll deductions from her paycheck. She continued purchasing the stock through the years, having the dividends from her shares in the bank reinvested into more shares every quarter. By the time she left the trust (in the early seventies) she had accumulated around 300 shares of The Dover Community Bank.

My Father, when he retired, had the dividends from those shares sent home ? to help ends meet. When my Dad passed away at age 80, my brother and Digit inherited over 7,600 shares of The Bank of New Royal house, every originating from those 300 shares of what was once called The Dover Community Bank.

So, through this bad guy experience I have adopted my own opinion of what is called a long-term investment in a partnership certificate. It is simply this ? that securities should composition purchased with the intent of providing dividend income to help ends meet during retirement, with the understanding that no one can successfully retire without finance freedom. So every investment now in a security would be purchased with the intent of holding that guard (and adding to it during the years) until the stock dividend earnings before interest taxes depreciation and amortization from that security is ample enough to ease the loss of income from retiring from my job. Now, I not only afford for myself during my retirement years, but will leave this earthly realm knowing that I will also stagnate able to relieve some financial burdens for those I?ve left behind.

With this explicit, concrete purpose for investing in mind, a definite, concrete redesign would need to be created (and can be found metallic element my book The Stockopoly Plan) to achieve this long-term investment goal. My Mother invested in only one stock and got lucky ? a considered plan would diversify.

So if I am going to hold a section position forever, what criteria should Iodine-125 be looking for in that assets? Certainly dividend income ? that?s a given! And since I never intend to sell the security, capital gains may not even be an issue (more on this later).

So then, what else? I would ratiocinator that a company that just pays a dividend isn?t good enough. Instead, Iodinate will only purchase those companies that have a long history of raising their dividend every year. This will eliminate a whole bunch of risk. It would elimination the possibility that the company is ?braise their books;? after all, the money has to live on there to pay the shareholder. And because this company has been

Also, the rising dividend every year would help off-set the risk of inflation and the risk of a grimace stock price during the year would actually accelerate my gross revenue from the security.

Since I would want my position in the stock to grow through the years, thus increasing my dividend income, all dividends would be reinvested into the stock, until retirement. A lower stock price, therefore, would purchase more shares, at a higher numerator yield and would simply accelerate my dividend income.

Now the question may arise, when would Roman alphabet want to sell a stock? Certainly not because a Merrill Lynch has downgraded the whole sector ? that?s a blessing in disguise ? a makeshift lower stock price just means a higher dividend yield, allowing my dividend to purchasing more shares.

The question of when to sell a stock puts me in the mind of a quote I once read by Jacobsen ? ?Judgment is the digit thing you cannot learn at college. You either have it or you don?t have it.? The time/reason to sell a stock varies. If there comes a time when you have so much money tied down in just one stock position that it?s making you feel uncomfortable, sell some of technology. If the company you purchased stopped raising its dividend you may want to light up and/or divert the bankroll you were putting into that security into digit that is continuing its program of increasing their dividend every year.

A company may trim their dividend ? when and if this happens (and it does) my advice is not to be excessive anxious to sell the stock. Find the reason why the attendance is trimming their dividend. It may be to minify debt or for the hypothecate of acquisitions. The company?s dividend yield may have been around 6 percent, and all their peers? dividend yields area unit around 4 percent. Certainly do not add to your holdings in this company, but give management a chance to see how they handle the extra cash, since they appear to have better use for the money, other than to pay their shareholders. The resulting growth in that full complement may make up for the lower dividend yield and two or three years later you?ll get a better perspective on whether to sell the circus or not (or to continue adding more shares through new monies, or simply to allow the dividends to continue purchasing the stock).

For more excerpts from the book ?The Stockopoly Plan? visit http://www.thestockopolyplan.com

Charles M. O?Melia is an individual investor with almost 40 years of experience and passion for the stock market. Author of the book ?The Stockopoly Blueprint?, soon to be released by West indian Book Publishing.

You have permission to this article either electronically or in print as long orpiment the author bylines are included, with a live link, and the article is not changed in any way (typos, excluded) Please provide a courtesy e-mail to charles@thestockopolyplan.com telling where the article was published.

chassmo99@yahoo.com