Course 505: Long-Term Investing's Tax Advantage
Can Good Trades Offset Taxes?
In this course
1 Introduction
2 The Toll Taxes Can Take
3 Can Good Trades Offset Taxes?
4 Long-Term Investing's Advantages

But what if McEnroe's frenetic trading earned him extra returns? Maybe he has a nose for trends and is able to stay one step ahead of the crowd. Well, if McEnroe earns 12% a year (versus just 10% for Borg) he'll accumulate $524,560 at the end of 20 years--still more than $13,000 shy of Borg's final value. McEnroe rants, "You're joking!" Even assuming zero commission costs, McEnroe's returns would have to beat Borg's by more than 2% each and every year before McEnroe could gain bragging rights. That feat is tough without a crystal ball. Even if you buy solid companies at good prices, it's next to impossible to predict what their short-term returns will be. There's just too much noise in stock prices. In addition, once you subtract the broker's commission, McEnroe will have to pay every time he sells or buys a stock, and he slips even further behind.

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