Question About Stocks

[The Fonz]

I've never invested, and I've got a question to ask.

Ex: Stock XXX is worth $.10, so investing $1000 into this stock would buy me 10,000 shares. The next day stock XXX goes up to $.12, and I sell all 10,000 shares. This gives me $1200.

What sort of fees/taxes would I be paying on this? Surely it can't be that easy to make $200...otherwise people would just mess around with penny stocks and do this every few days. Right?

Help would be muchly appreciated!

[Delthefunky]

Not as easy as it sounds

[SeeGeeWhy]

You pay a brokerage fee on each transaction, so that is on the "buy" and the "sell", and this varies depending on who you trade with.

Then you will get taxed on the $200 "capital gain" at the end of the year.

[The Fonz]

Originally Posted by SeeGeeWhy

You pay a brokerage fee on each transaction, so that is on the "buy" and the "sell", and this varies depending on who you trade with.

Then you will get taxed on the $200 "capital gain" at the end of the year.

Thanks, I knew it sounded too good to be true!

Going by the example I gave, would that $200 gain be completely gone after the brokerage fee and taxes? Would I actually wind up paying money?

[Winsor_Pilates]

Originally Posted by The Fonz

Thanks, I knew it sounded too good to be true!

Going by the example I gave, would that $200 gain be completely gone after the brokerage fee and taxes? Would I actually wind up paying money?

If you use small online traders or even most major banks the fees are fairly small.
You would certainly make money in your example.

The problem is not fees or taxes, the problem is that you're assuming your penny stock is going to go up. What is it goes down as most do?
Penny stocks are usually the most high risk stocks out there, and chances are your 10 cent stock will end up being worth nothing.

[Bring_Back_Shantz]

I doubt the borkerage fee would be big enought to eat up the whole profit, and the capital gains taxes aren't too bad either.

The reason everone doesn't do it and make a ton of money is because it's not that easy.

To find a stock that is gonna go from $.10 to $.12 is not that easy, how may companies go up 20% in value in a day or two? Not too many.

Sure you may make 20% in a day, but you could just as easily lose 20% in a day.

Edit: Damn beat to the punch.

[MoneyGuy]

Then you will get taxed on the $200 "capital gain" at the end of the year.

Actually, no. Cap gains are half tax free.

And to the OP, it's certainly not that easy. You can lose a lot of money if you don't know what you're doing.

[Wookie]

Originally Posted by The Fonz

I've never invested, and I've got a question to ask.

Ex: Stock XXX is worth $.10, so investing $1000 into this stock would buy me 10,000 shares. The next day stock XXX goes up to $.12, and I sell all 10,000 shares. This gives me $1200.

What sort of fees/taxes would I be paying on this? Surely it can't be that easy to make $200...otherwise people would just mess around with penny stocks and do this every few days. Right?

Help would be muchly appreciated!

I'll give you how it would work on my etrade account.

You put $1,000 into said stock. cost $9.99.
You sell $1,200 of said stock. cost $9.99

You have $200.00
Minus $19.98
Remaining $180.02

You're going to pay taxes on $100.00
Lets say you pay 35% taxes.

$180.02
- $35.00
$145.02

You need the stock to increase 20% to make 14%

Now that's assuming you can get out. Lots of those stocks that trade a few cents each day have much more seasoned people playing them. So their are already a ton of bids and ask on each side. You'll line up to get your shares.. maybe get them at $00.10. But usually there is a ton of asks at $00.105, $00.11, $00.115, $00.12. They'll all get their fill before you do.

Then the selling pressure will drive it back down.. repeat. While you're still wondering when can I get rid of my shares.

Chances are you'll wait a long time.

Then you'll start to get the hang of it. See another one that looks a bit better, decide to get out of this one for the other one. Take a small loss. Now you're going to need 10% just to break even and 27% to get that original 20% you were looking for.

Repeat!

It can work.. I had a little company that paid my yearly insurance a few times. I had that money to play with through a tip by someone who knew a heck of a lot more than 90% of the people in Calgary about O&G. And in the end.. I probably am even...

Although it's a really good learning lesson!!

Good luck!

** my numbers may be completely off as I just am rambling away.

[The Fonz]

http://ca.moneycentral.msn.com/inves...2008&CP=0&PT=2

I don't know how I stumbled across this stock, and I don't know what the company's about either. I've just been watching it's value for a while, I remember wanting to throw a few hundred dollars in to this stock a few years ago just for fun but I never got around to it. Anyway, the link I gave shows it's activity over the last 10 days. On January 2nd it was worth $.11, and on January 8th it was worth $.14, and now on January 15th it's worth $.13. It just seems to bounce around between $.10 and $.15, but I haven't really kept a close eye on it...

I want easy money dammit!

[REDVAN]

this is off topic but I thought it said "question about socks..."

[The Fonz]

Originally Posted by REDVAN

this is off topic but I thought it said "question about socks..."

Don't you dare de-rail my thread, I'm trying to learn!

[calf]

Originally Posted by The Fonz

http://ca.moneycentral.msn.com/inves...2008&CP=0&PT=2

and I don't know what the company's about either.

yikes! and you just want to go in and invest $1000? Put some time into researching the company, and look for something that you believe will make you some cash/add value in the future...I'm not an expert, but looking at how the stock price fluctuates probably isn't the best way to go. Maybe you think this one will, maybe not...but you should probably know the basics...

http://www.explorationtyphon.com/english.html

you can find their financial statement & other information on www.sedar.com too

[Wookie]

Originally Posted by The Fonz

http://ca.moneycentral.msn.com/inves...2008&CP=0&PT=2

I don't know how I stumbled across this stock, and I don't know what the company's about either. I've just been watching it's value for a while, I remember wanting to throw a few hundred dollars in to this stock a few years ago just for fun but I never got around to it. Anyway, the link I gave shows it's activity over the last 10 days. On January 2nd it was worth $.11, and on January 8th it was worth $.14, and now on January 15th it's worth $.13. It just seems to bounce around between $.10 and $.15, but I haven't really kept a close eye on it...

I want easy money dammit!

http://www.stockhouse.ca/comp_info_h...view_history=1

Look at the volume traded every day. The average volume over the last 60 days is 140,000 traded per day. To buy your 10,000 you're going to have to buy 7% of the average daily amount traded. Chances are if it's sitting at $00.10. you're going to pay $00.105. because that'll be the ask. Whereas there'll be a long line of bids at $00.10. Ditto for when you sell. If you have time you can wait it out and get your order through.

Now sometimes what season traders will do is take a bit of your order. You'll end up paying commission to only sell a bit of it. Then you'll get stuck with an odd amount of shares or something or only partially sell your shares. So you'll be stuck having to sell more later and again pay commission which will again bite into your profits.

phone rang, more thoughts later...

[Wookie]

Originally Posted by calf

yikes! and you just want to go in and invest $1000? Put some time into researching the company, and look for something that you believe will make you some cash/add value in the future...I'm not an expert, but looking at how the stock price fluctuates probably isn't the best way to go. Maybe you think this one will, maybe not...but you should probably know the basics...

http://www.explorationtyphon.com/english.html

you can find their financial statement & other information on www.sedar.com too

Losing $1,000 bucks is a good way to learn something quickly!

[Phanuthier]

Originally Posted by The Fonz

Don't you dare de-rail my thread, I'm trying to learn!

Defiantly spend alot of time before you spend alot of money

Learn about macroeconomics... learn about psychology of stocks... history has shown that technical trades can lose a lot of money. The "get rich quick" is a scary game to play. Betting on penny stocks are dangerous, especially in a bear market. Why are you bidding on them? There are hundreds of good ideas that come around every year, but very few of them make it, alot due to lack of entrepreneurial skills and marketing.

Some MBA grad recently described how he made alot of money on small oil company stocks. I thought that was a pretty good post about how to learn to play stocks. I'm no investing expert, but its something I'm learning alot about as well and there are tons of resources out there. Also, as I said, tons of books out there. Know which books to read, however, there is alot of bad advice out there too.

[calf]

Originally Posted by Wookie

Losing $1,000 bucks is a good way to learn something quickly!

Homer: Marge, do you want it done right, or do you want it done fast?

Marge: Like every American, I want it done fast...


*BOOM*

[KTown]

I purchase stocks all the time when there at 50 cents or lower and they turn into 2 - 4 dollar stocks, but I always do my research prior to investing. Now that being said I could lose that money however I always read what the company is about and what they will be doing in the future. There is alot more to this than you think. I'll look into it tomorrow. When I talk to my people.

If you want to get involved with stocks the key is to surround yourself around good people who have a good track record. There are good investors out there. You won't always win but as long as you win more than you lose you'll come out ahead. Which is the goal.

Plus it is never a bad thing to have capital losses. It's actually good to show that sometimes.

[Winsor_Pilates]

I've got a tremendous resource for penny stocks near my finger tips.
My GF gets amazing stocks allocated to her that do amazing things, and as soon as I can get a little of my $$ in there, I will be laughing.
Looking forward to when her allocations are too big for her and I can chip in a little at the side.

[IHATEOILERS]

[quote=Wookie;1149607]I'll give you how it would work on my etrade account.

You put $1,000 into said stock. cost $9.99.
You sell $1,200 of said stock. cost $9.99

You have $200.00
Minus $19.98
Remaining $180.02

You're going to pay taxes on $100.00 [Quote]

Just a little nit: I think for tax purposes your cost base would be 1009.99 and your proceeds 1190.01. Therefore, your Gain would be 180.02, 1/2 is taxable = 90.01. Therefore tax payable is your tax rate mutiplied by 90.01.

Just be careful with penny stocks....if you start out with a few wins you get a little cocky and bet too much....as has been mentioned early in the thread, most of them go to 0. Also pay attention to the liquidity (trading volume), because you may have trouble getting out of a position that you manage to get into.

[red sky]

In addition to what everyone else said, you have to look at the bid/ask price because what is showing may not be what you can sell it at. Some penny stocks have a larger spread if there isn't a lot of volume or outstanding shares. One word of advice, stay away from pink sheet stocks. If you are going to invest in penny stocks take your chances on the venture. Just my two cents