3 Tips for Managing Your Stock Earnings

Handling your stock earnings properly can make a huge difference in your financial situation in the future. There are a variety of ways that you could handle stock earnings, and some are better than others. Here are a few tips for managing your stock earnings properly.

1. Consider Taxes

One of the most important things to keep in mind when investing in stocks are the taxes that will be incurred. Many investors fail to remember the taxes that they will have to pay and go on about their business without planning ahead. When a gain is realized on a stock sale, you will have to pay capital gains taxes on the profit. Therefore, when you make money in the stock market, you should always set aside a portion in order to pay the capital gains taxes. If you believe that you will have stock losses that offset these gains, then you may not need to worry about it. Adjust the amount of money that you put back depending on your trading style and how successful you are at it.

If you receive dividends from your stocks, you also want to consider the tax obligations for these as well. Dividends are taxed at your normal marginal tax rate. Therefore, the amount of money that you hold back for these will depend on how much money you earn overall.

2. Reinvest

One great way to handle your stock earnings is to reinvest them back into the portfolio. If you earn money from stocks it can allow you to buy even more shares for the future. In the stock market, if you are trying to attain long-term growth it is all about getting as many shares as possible. Therefore, as long as you believe the long-term success of the companies the invest in, the day-to-day movement in the market will not matter. You are looking for a sustained period of growth that can provide you with gains in your portfolio.

3. Money Market Account

One way that many people handle their stock earnings is to put their money into a money market account. A money market account is an account that is held with your investment broker. You can typically purchase more stocks with the money in this account at any point. Therefore, this makes a good holding place for your funds when you are in between investments. You do not always want to buy stocks just for the sake of buying more stock. You want to do your research and find a company that is worthy of a purchase of stock. You can buy as many stocks as you want, but until you find a good company to invest in you will not make any money. Therefore, maintaining your capital is a vital part of the trading process. Put your money in a money market account instead of buying random stocks with it is often a better strategy that can help you maintain your wealth.

blog comments powered by Disqus
Scottrade