In the wake of the volitile stock market in 2016, I’ve witnessed a lot of dividend growth investors switched/add stock option trading for income. Although I have not trading option, but I did short some stocks this year to raise money to buy my rental property Midwest.
My brokage has recently upgrading the online system where I can view my gain/loss so far this year on the stocks that I’ve already traded.
Althoug, the $2,198.59 gain this year doesn’t say a lot, I wouldn’t count these shortterm trading as “passive income”, but if I add the profit it will make this year income from taxable investment account way pass the original $6000 goal.
What make this income sweet was I made most of the money, buying stock during the sell off last August/September/October and this year January/February. And my brokage account allows 100 free trades per year.
With tenant is potentially moving in November 1st, on my rental property. I’m probably set to make $1200/month in pretax, pre-fee, and expense. What sweet about this rental property is it’s passive. As I did not have to lift a finger in fixing. I contracted out to my brother. The fees will be higher, but it’s definitely different from having property here in town and I have to take care of everything.
Drawbacks and lesson learned.
1. While it was cool that I was able to sell stocks on a crunch to raise money for property investment. But if the market is down 20-50%, I might very well in the position to lose money. And since I sold these stocks, 90% of them, the prices have gone up 10% from my “profitable” sell date.
- Lesson learned: I should have a fund for this type of situation. Savings or non penalty saving
2. Capital gains taxes – this is another thing I didn’t account for. The dividend income and long term capital gain are taxed at 15% for me. But I have close to $2k in short term capital gain, which will be taxed at 35%. This again is a $600 penalty for not planning well.
3. While the property will soon be earned me money, but since I delegates out to family, the project has taken longer than expected.
- Give clear contract and follow through. I extended several times with my brother and I shouldn’t have.
Whats about you? Are you going to report your capital gain/loss from stock trading when you feel like you no longer believe in the companies or you have to sell to fund a project?