10 Investment Tips for Beginners: #2. Be aware of taxes.
Posted on | March 26, 2009 |
A lot of people let tax rates and events dictate their investment decisions. This is unavoidable to some extent, but taxes are only part of the picture. I am not saying you should ignore tax policy. Just know what the tax policy is and how it affects your investments.
For example, buying tax exempt bonds when your tax rate is 10% doesn’t make much sense. Know when it’s OK to pay taxes. Similarly, holding an index fund with little capital gains generation in your tax deferred account doesn’t make much sense either.
This is different than beware of taxes. The point is that tax policy should be a part of your investment decision making, but you should not let fear of paying taxes paralyze you into not investing, not selling, or investing in the wrong things.
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