Profiting Spectacularly From Forex And Stocks

Capital appreciation will be your key reward whether you buy in stocks or Forex: This type of investor isn't interested in dividends, but rather in watching his stock's market price rise or one currency's value rise against another.

This type of procedure has three distinct advantages. To begin with, if your judgment is sound, you will make more money faster than if you rely solely on dividends. For example, a year's worth of effort for a man who buys 100 shares at $30 and sells even at a 10-point profit is $1,000 (minus commissions). This is approximately seven years' worth of dividends from the $30 stock, which pays a traditional 5% yield.

Second, if you keep your investment for more than six months, your profit is deemed a long-term capital gain, which is taxed at a maximum of 25% for many people, which is a significant savings above straight-income rates.

Finally, even if your stock does not perform as expected, there is always the possibility that it will be a good income source.

Of course, this is a sort of rationalization. It's pointless to claim to be in the capital-appreciation business if all you have to show for your efforts is a jumble of dividends. The more consistent approach is to sell the non-producing stock (losses are tax deductible) and look for a winner elsewhere. It takes a lot of courage to do something like this. There's nothing like a pair of non-growing growth equities to knock the wind out of a capital-appreciation investor.

On the other side, since World War II, the market has been steadily rising, making it easier to find and join a company with good potential. And, as previously said, an investor may wait five years for a 10-point return and still be ahead of the dividend collector.