My Individual Stocks Gain or Loss Results Reported for 2009 Taxes

One of my favorite things about tax time each year is calculating the “gain” realized on the stocks that I sold in the associated tax year. You may be asking yourself, “Why is this such a great exercise?” Truth be told, it probably is not that enjoyable for some people, but it is for me because it just further highlights/reinforces that investing in individual stocks is not a worthwhile exercise for me (and I believe for most people).

So, let’s look at my gains (or losses) for the past two years tax calculations resulting from the individual stocks that I sold vs. the performance of the S&P 500 index:

Year 2008 — $300 loss, S&P500 return = 40% loss
Year 2009 — $592 loss, S&P500 return = 26% gain

So, in 2008, I did all right as compared to the market, but in 2009, the proceeds from the stocks sold in my accounts generated far inferior results.

Just a little background on why I have stock holdings at all:
I have stock holdings remaining still my my first couple years of investing where I dabbled around with different techniques, penny stocks, investing newsletter, etc. Now that I have seen the light and the error in my ways, I no longer actively buy individual stocks, unless it is such a small amount that it is truly just to “play around with.”

What’s the morale of the story here?

For me, it just indicates further the following things:

1) Stick to long-term investing in index mutual funds, preferably in tax-sheltered accounts.
2) I do not trust myself enough with my own money to invest in individual stocks, especially over the long term.

Keep on learning!

Jacob

To receive immediate updates when topics such as these are published, subscribe to my blog feed using the link below:
Subscribe to My Money Blog