Which example makes more of a return?


Let’s take stock X and stock Y. The assumption is they move and grow together both ending up at the same price per share in year 20.

In example 1, the person buys one share of stock X for $100 and holds it for 20 years when they decide to sell. Stock X is $400 in year 20

In example 2, the person buys one share of stock Y for $100 and holds it for 5 years. In the 5th year, the stock is worth $175. They decide to sell stock Y and purchase stock X, which also happens to be $175 per share. They end up holding stock X until year 20 when they sell it at $400/share.

Which example is a better return on investment?

Edit: Assume a 15% long term capital tax on the gains in all years.


Comments

Leave a Reply

Your email address will not be published. Required fields are marked *