CitizenOfTheWorld wrote:
Thanks for the info, JR8. So for people who have a retirement account that they sell after several years, is that income or capital gains and would it be taxed?
P.S. Traders: avoid options like the plague, except as part of a buy/write strategy.
Retirement account, or self-invested retirement portfolio? It matters as the former could include UK SIPPs, ISAs, or say a US parallel (Roth IRAs??).
If you open a regular trading account, and buy 20 odd diversified blue-chip stocks, and hold for the long term income and growth, then you are the master of your own low-fee affairs (it requires research and some ongoing admin though - that said there are web-forums almost like 'investment clubs' where the strategies are discussed, assessed, analysed etc., so there is plenty of info being shared and discussed. I've been in one for 15 odd years now*1, and the characters remain pretty much the same, and the info/advice/opinion is... great, supportive, 'we're all in this pioneering little self-help boat together'
).
I worked for many years in blue-chip private client banking/trading - I would not
dream of putting my 'retirement portfolio' in the hands of any such bank. Enough said*
So for me, if I was say UK tax resident, there is something like a £10k annual CGT exemption. The long term strategy would be to sell off lines of stock each year, maximising use of that exemption. That is a common strategy. For me, being geographically mobile, I expect I'll come up with some plan with no tax implication (portfolio held offshore?)... we'll see.
Yep writing covered calls, I've looked into that, as a way for generating another income stream on a passive portfolio. But two things struck me, #1 the need/time to learn the strategy well enough such that it's worthwhile. It's pretty intense 'Black-Scholes bell-curves' etc #2 the apparent contradiction that you get called (forced to hand over) stocks that are performing much better than you anticipated. i.e. you earn a small additional income, but with the risk of having to hand over your star performers... not for me, or IMHO for people who 'don't know, what they don't know'
Keep it simple - stick with what you understand > fight your wars in your own back garden, the territory known best of all, by you.
* Or perhaps not
. There is an inherent conflict. The brokers are paid almost wholly upon the business and fees they generate, what are called 'Production credits'. They need to 'produce', trade, force activity, flip you from one product to 'this week's star recommendation'. So you pay your personal broker, to flip you from fund to fund, where you pay fund management fees, and as long as you hold that/those funds the broker is earning an annual 'trailing commission'. They are never ever, never, ever! going to suggest you invest directly in plain stocks, and 'hold them for ever' aka Long Term Buy and Hold/LTBH. It's a dirty game, and you can see why I won't participate. [Do note further; that was a blue-chip historic Wall Street bank, and not some cowboy-shop]
*1 'The Motley Fool' - US and UK versions. Free. The self-help investment mother-source. [No connection, barring being a long time subscriber].
