Thursday, June 10, 2021
Taxes are inevitable, and long-term investors often face the reality of paying capital gains taxes when they sell stocks in their non-registered investment accounts. When this occurs, investors are left with less money to reinvest and compound over time. To offset this impact, investors want the return from whatever new stock they buy to be higher than the stock they sell. Interestingly, the theoretical break-even return required from a new stock to justify a switch may not be as high as some think. This can be illustrated through an example.