Making investment in the stock market is a great way to increase your wealth. Shares are fractions of a company. When you possess shares directly you become a shareholder which gives you the right to vote whenever certain decisions within the company are to be made.
Some are owned by the mutual fund which entails pooling of resources together from a number of investors.
Cost varies according to the needed service. Some of the charges incurred while disposing of a share previously held by the investor include:
A commission is a fee that is basically paid to a broker for helping you submit your trading orders to the market.
Before the advent of the internet, brokers make commission not only by taking care of your orders but also by giving advice on the assets to pick and the best way to invest in them.
A commission can be charged as a percentage or it can be a flat rate.
Online trading usually charges a flat rate while the traditional brokerages charge a percentage of the volume of your purchase as commission.
Commissions can eat into your profit very fast as you are charged a commission at every click of the trade button and whenever a phone call is pulled through to your broker.
Even when you lose money, you must still pay your broker commission.
This is charged on the sale of shares. The investor disposing of the shares will be charged based on the total turnover. It is a form of direct tax.
Capital gain tax
Whenever a security is being sold, the tax liability is calculated by how much was used to purchase the security and the sales price.
If you were able to sell the shares at a price higher than the purchase price, the difference is taxable as a capital gain tax.
Capital gains are charged at varying rate depending on the duration of ownership and tax bracket. Shares held for more than one year are considered long-term and are taxed at a lower rate than the normal income. While short-term gains are taxed as normal income.
An individual is entitled to capital gains tax allowance if the profit level from the stocks held by the individual is lower than a given threshold.
This may be charged either monthly, quarterly or annually by some platforms. Although it is waived in some instances when the minimum number of trades is made or when the account is of a certain size.
Write a short call of action. Example here: So what did you think of this article? Loved it, hated it? Leave a comment or reach out to us via FB, Twitter or G+ (Live links).