Lux Investing
What are the advantages and disadvantages of investing in the growth or income market?
Also, what is a bond? I know that you have to pay taxes, but what else? Please help me! My AP Eco teacher is having me write and essay and this is her first year teaching so she doesn't explain things so well. Thank-you, =) which one do you think is better?...income or growth
Public Comments
- If you have an instructor that does not explain things well, you need to rely on the book. Fortunately, I escaped college without too many of these situations. A bond is a debenture, which is basically selling debt the same way that you would sell stock. If you sell stock, you promise the investor a portion of your earnings, equal to the percentage share that they own in your company. With a bond, you are promising to pay a fixed percentage of interest, based on the bond's value (usually $1,000). Growth and Income markets contain stocks that either have good growth potential (duh!) or provide a steady stream of dividends (income). Utilities used to fit the bill, but now you can find a variety of stocks used for this purpose, mostly based on recent performance or attitudes. You pay taxes at your regular income tax rate on dividends, and at capital gains rates based on long-term share holds and sells. If you sell a share that you have held over one year, you pay capital gains rates on any gain. Conversely, you can deduct the loss on any sale up to $3,000 over and above any gain (i.e. Max $3k loss against regular income). Capital gains rates can be 10% or 20%, depending on your total taxable income. Use software to figure that one out. I wish you luck!
