[[Thanks for all the replies, Roy. One more question.]]Hi again, Mercy. You've just become one of the "locals" around here lately.[[ OPTION A Invest in RP4 stocks, trading once a year on Jan. 2nd. Average 2 trades per year and Average annualized return for 30 years is 20%. OPTION B Buy 1 to 4 LTBH stocks (MSFT, KO, SGP, etc.) and let them sit for 30 years. No trades and average anuualized return for 30 years is 20% Assuming the annualized return for each approach is the same, do I reap the bigger benefit from saving the potential yearly capital gains taxes in OPTION A or would I fare better by saving the huge capital gain at the end of a thirty year run up of 1 to 4 stocks in OPTION B? I suppose what I should have asked is which of those two options would be most favorable OUTSIDE the Roth IRA setting? Since I'm going to be using both approaches in my total investment portfolio.]]If you are talking about a taxable account, you normally want your gains to be long term in order to take advantage of the preferred long term capital gain rates. It looks like in either case your holding period would be longer than one year, so I'm not sure exactly what you might be asking. At this point, you don't get "extra credit" for "super long term gains", but that will change in the future. Check out my post on the "super long term gains" in the Capital Gains Tax Changes post in the Taxes FAQ area (archives). [[I'm assuming that it would be more advantageous to keep the LBTH stocks in the taxable acct. That way, even though the annualized rate of return would be the same, the infrequent trading will create less taxable events along the way to 30 years +. Even though the capital gains at the end might be gigantic, a greater amount of my funds will have been able to stay at work the whole time, producing an ultimately larger return, all things considered. Does that make sense?]]Yes it does...and you are basically correct. Again, in general, you want your taxable gains to be long term in nature, and hope that you don't get screwed by any future tax law changes.Hope this helps...TMF TaxesRoyWant to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Be the first one on your block to own this masterpiece. There is still time available to do that tax planning (and tax saving) before the end of the year. So just click on this link (http://www.foolmart.com/market/product.asp?pfid=MF+013+I) to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on http://www.fool.com/school/taxes/taxes.htm and you'll be right at the home page. Pay special attention to the "archives" section. Check it out. Finally, if you need to get to the IRS web site, click on http://www.irs.ustreas.gov to go directly there.
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