The theme this week on the Retirement Quick Tips Podcast is the Deadly Sins of Investors In Bear Markets.

Today, I’m talking about the deadly sin of ignoring taxes & trading costs. When markets are in a tailspin, it’s easy to buy and sell without considering taxes or trading costs. 

Because investors tend to buy and sell more frequently during volatile markets, they often do so while ignoring the gains and losses generated by their sales, and ignoring the fees for buying and selling investments. When you hold an investment for shorter than 1 year, the tax rate you pay on gains increases, so you’ll pay more in taxes if you realize gains from your short-term trades. 

Trading costs increase as well for many investors the more often you trade, and those fees can really add up and eat into your net returns. 

The lesson here is to keep track of your gains throughout the year, and know where you stand with the gains in your taxable, non-IRA investment accounts. 

And always know what the fee or commission is whenever you buy or sell an investment, so you won’t be surprised. 

Perhaps most importantly, you’re going to be better off sticking with a buy-and-hold philosophy, since the research bears out that the more frequently you trade the more in fees and taxes you’ll pay, and the worse your returns will be with a short-term focus. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance