When To Accept Short Term Capital Gain Tax Rates

A lot of confusing advice has been given on the topic of the short term capital gain tax.  Many people become confused regarding the tactics short term capital gains. When you get confused about financial instruments, you need to reduce everything to the most basic elements. The purpose of financial investment is to increase your financial health and every decision that you make should emerge from that goal.

Short Term versus Long Term

It is important to understand what a short term capital gains tax is. In order to fall under the short term capital gains tax, you need to hold an investment for less than six months and then sell it for a capital gain. 

The only time you should really employ this tactic is when you think that you can maximize your profit. In other words, the company you have invested in has a boom in stock prices, but may not maintain the price increase in the long term. In that case, the added tax rate acceptance is warranted because of the much higher value of the stock in the short term.