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Stock formula question
Posted on 7/8/10 at 11:38 pm
Posted on 7/8/10 at 11:38 pm
I am trying to figure out a formula for knowing when to sell a position after I have reached a particular percentage gain, taking transaction costs and capital gains taxes into account...but so far I have been unsuccessful (and google hasn't helped). I was hoping the MB could rescue me
A simple example:
Say I paid $25/share for 10 shares of XYZ. It cost me $5 to buy and will cost me $5 to sell. My capital gains tax bracket is 25%.
At what price will I be able to sell and realize a 10% gain free and clear? Is there a popular formula for this? If the answer is "it depends," I would even appreciate something to get me close to the right answer
Thanks
A simple example:
Say I paid $25/share for 10 shares of XYZ. It cost me $5 to buy and will cost me $5 to sell. My capital gains tax bracket is 25%.
At what price will I be able to sell and realize a 10% gain free and clear? Is there a popular formula for this? If the answer is "it depends," I would even appreciate something to get me close to the right answer
Thanks
Posted on 7/9/10 at 12:20 am to Feed Me Popeyes
10%= (sold price-purchase price-10)*.75
Posted on 7/9/10 at 12:21 am to Feed Me Popeyes
quote:
My capital gains tax bracket is 25%.
Sounds like a homework problem.
You bought $250 worth of stock, and want a $25 gain free and clear.
1 / (1 - .25) = 4/3
So you need $33.33 (= $25 x 4/3) in taxable CG to end up with a post-tax profit of $25.
Add in the $10 in fees and I think you need to sell at $293.33 = $29.33 per share--so a 17.3% rise in the market price is necessary for you to clear 10%.
Posted on 7/9/10 at 6:10 am to Feed Me Popeyes
thanks guys...I was struggling with that for too long. My brain is mush when I get home from work
Posted on 7/9/10 at 6:28 pm to Feed Me Popeyes
i don't think you should be buying stock if you can't figure this out.
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