So I hope you are all doing fine with your portfolios. I checked my YTD performance due to mid-year. I am up 21% (30th June) vs the S&P's about 14%. I just realized something I never really thought of before, because I was not a huge seller so far. My performance would have been much better without taking tax hits from selling stocks.
I am from Europe, tax hit is about 26% on all gains above 1000€(annually) when selling. I mean, I knew it before, but I just realized it this year, as my tax hits are 4 figures now. I do understand more and more why Warren B. says “If you aren't thinking about owning a stock for ten years, don't even think about owning it for ten minutes.” The most important part is really to not interrupt compounding.
Take for example AAPL. €10k invested in AAPL in January would be +17% €11.7k. You would have beaten the market when holding. If you sell: €1.7k gains 26% taxed left about €11.25k left. You would be up only up about 11% and been beaten by the index after selling. Index-funds have the big advantage, that they get taxed only at the very end, that way you don't interrupt compounding. I mean this is no rocket science and I am dumb to realize this only now, but the recent tax hits really opened my eyes.
To end this post with something useful: How is your portfolio doing? Have you beaten the S&P? What's your % YTD?
TLDR: Tax on my investments is destroys my gains. Only interrupt compounding, unless it's absolutely necessary.
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