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  1. #11
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    Quote Originally Posted by CJ View Post
    A couple of points:
    - unlike property, there is no tainting. Just because you hold one share for trading, does mean the hold portfolio (or all associated portfolios) are tainted.
    - it is on a share by share basis.

    As such, diferent portfolios is not needed but is good practice.
    Agreed separate portfolios are good but not necessary.


    The thing I struggle with as a buy and hold investor, is how can I buy a share like Xero or DIL (both small parts of my portfolio at purchase price), Obviously growth, not dividend stocks. However, they do form part of a diversified portfolio. And I fully expect them to become good dividends stocks at some stage - DIL in the next year or so and Xero in about 3-5 years.

    Or how about RYM - dividend yeild is pathetic but combine with Growth, a good stock as part of a diversified portfolio. Even some of the utilities I own pay less than the interest rate on my margin account.

    I am obviously not buying for a quick, or even mid term trade but if you look at the yield I get, potentially you could argue at least 50% are not bought solely for yield.
    It should not matter too much which stocks you have in your portfolio as long as you can justify you bought them on the basis that they had increasing EPS and that will fund future dividends.

    I would be more concerned with how many trades you do a year (entering or leaving a share) and the average time frame you are in the share.

    In theory it should not matter if you fund your investing through equity or debt when it come to determining if you are investor or trader. However in practice the IRD are more likely to say you a speculating if you have bought on margin. Secondly if you are claiming loss and booking capital gains you maybe more likely to get target for an audit.
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  2. #12
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    My understanding is that an expectation of capital appreciation does not in itself make you a trader. Investing in a mixture of growth assets to protect your savings against inflation is still investment. I don't think it would be queried as part of a balanced portfolio that also included some taxable income.

  3. #13
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    Quote Originally Posted by Lizard View Post
    My understanding is that an expectation of capital appreciation does not in itself make you a trader. Investing in a mixture of growth assets to protect your savings against inflation is still investment. I don't think it would be queried as part of a balanced portfolio that also included some taxable income.
    Which raises an intersting question: When Labour eventually get back in, will a portfolio still need to be split into two for tax - where capital gains tax apply to buy and sell equities, and another where income tax will apply to capital gains. Or in other words, will intention still be a test for taxation?

  4. #14
    Advanced Member BIRMANBOY's Avatar
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    It all comes down to as others have said..your intent. If there is an audit and you can argue your point that any cap gains was not from purposefull "trading" but merely a fortunate result of canny picking and market forces and now you want to transfer the funds into a better vehicle then you have a strong case. If all of your "balancing" is always on the plus side then your arguement might be somewhat weakened, and could be challenged immediately if for example it was with the same stock multiple times. Also as others have said time of ownership is going to be an indicator of intent. You buying Xero or Dil or Rym would seem to me (as a common sense observation not necessarily informed) to definitely fall into the category of "not trading". Fact that there is not much yield is sort of a side issue but they were purchased for long term growth is the important criteria. Tax is withheld on dividends and any cap gain if and when you finally sell is result of long term investment not trading for profits. If you find yourself returning to the same share time and time because its making you money in the spreads its time to call yourself a trader of course. One of the shares I would like for trading has been TEL. I could definitely see some point in trading in and out of that .
    Quote Originally Posted by CJ View Post
    A couple of points:
    - unlike property, there is no tainting. Just because you hold one share for trading, does mean the hold portfolio (or all associated portfolios) are tainted.
    - it is on a share by share basis.

    As such, diferent portfolios is not needed but is good practice.

    The thing I struggle with as a buy and hold investor, is how can I buy a share like Xero or DIL (both small parts of my portfolio at purchase price), Obviously growth, not dividend stocks. However, they do form part of a diversified portfolio. And I fully expect them to become good dividends stocks at some stage - DIL in the next year or so and Xero in about 3-5 years.

    Or how about RYM - dividend yeild is pathetic but combine with Growth, a good stock as part of a diversified portfolio. Even some of the utilities I own pay less than the interest rate on my margin account.

    I am obviously not buying for a quick, or even mid term trade but if you look at the yield I get, potentially you could argue at least 50% are not bought solely for yield.

  5. #15
    Advanced Member BIRMANBOY's Avatar
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    Hypothetical since Labour is history and will well "labour" to get back into power.
    Quote Originally Posted by fungus pudding View Post
    Which raises an intersting question: When Labour eventually get back in, will a portfolio still need to be split into two for tax - where capital gains tax apply to buy and sell equities, and another where income tax will apply to capital gains. Or in other words, will intention still be a test for taxation?

  6. #16
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    Quote Originally Posted by fungus pudding View Post
    Which raises an intersting question: When Labour eventually get back in, will a portfolio still need to be split into two for tax - where capital gains tax apply to buy and sell equities, and another where income tax will apply to capital gains. Or in other words, will intention still be a test for taxation?
    No. I would have thought you would pay tax on all dividend when received and pay the CGT on all shares when you sold them regardless of whether you held for income or capital gain. That is how it works overseas.

    Argulably if the income tax and CGT tax rate are different, IRD could argue (as they do now) that your capital gains, are actually income. I dont know if this is prevalent overseas. I know that PE funds treat their carried interest as 'capital' when it is clearly the income from their efforts - admit-ably normally a huge amount at the close of the fund.
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  7. #17
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    Quote Originally Posted by BIRMANBOY View Post
    It all comes down to as others have said..your intent. If there is an audit and you can argue your point that any cap gains was not from purposefull "trading" but merely a fortunate result of canny picking and market forces and now you want to transfer the funds into a better vehicle then you have a strong case. If all of your "balancing" is always on the plus side then your arguement might be somewhat weakened, and could be challenged immediately if for example it was with the same stock multiple times. Also as others have said time of ownership is going to be an indicator of intent. You buying Xero or Dil or Rym would seem to me (as a common sense observation not necessarily informed) to definitely fall into the category of "not trading". Fact that there is not much yield is sort of a side issue but they were purchased for long term growth is the important criteria. Tax is withheld on dividends and any cap gain if and when you finally sell is result of long term investment not trading for profits. If you find yourself returning to the same share time and time because its making you money in the spreads its time to call yourself a trader of course. One of the shares I would like for trading has been TEL. I could definitely see some point in trading in and out of that .
    That is my view too. The concern, esp for Xro is if I see before they start paying a dividend, it makes it hard to argue I bought for 'income'. Having said that, I dont think IRD has knocked on the door of every XRO shareholder who has sold to date.
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  8. #18
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    Having been through an audit (was nearly 10 years ago) and lost several arguments and having inocme reassessed with the subsequent penalties here is a couple of points that I experienced -

    Mr Winner - we note that you hold some shares that have and probably never will pay a dividend - so the intent really was to make a capital gain wasn't it Mr Winner
    Mr Winner - noble intention of you protecting your capital by selling shares when they start to lose value and rebalancing your portfolio when you become overweight in one some shares ..... but Mr Winner more than60 trades (buys and sells counted separately) a year is more than we would expect from someone whose main aim is generate income (tax paid on this) from a portfolio.
    Sorry Mr Winner you can't have it both ways - if you are a 'trader' you can't be an 'investor' as well .... and yes Mr Winner you are seemed to be a trader and until you can convince us otherwise will always be one.


    Even with professional advice I lost the battle. maybe the record keeping was all the best but I did declare and pay all the dividends I got so I didn't feel guilty but was pissed at the penalties

    This was about the time when things could double (or half) pretty quickly which may have been the motivation for chasing a few like me. I think I got noticed when they went through an IPO and followed up those who sold rather early in the piece

    These days Mr Winner doesn't have any shares in his name - they all go through a company and a family trust with proper record keeping and intent etc but sometimes I sometime wonder if a 'capital' account is really a 'capital' account. My reasoning is that if a tax agent files your tax returns that'll keep the IRD away

  9. #19
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    Quote Originally Posted by CJ View Post
    No. I would have thought you would pay tax on all dividend when received and pay the CGT on all shares when you sold them regardless of whether you held for income or capital gain. That is how it works overseas.
    But if all gains are taxed at the CGT rate, then it will need to be set at the highest income tax rate - currently 33% - or those who currently pay income tax on gains will be getting off too light to suit a labour govt.

  10. #20
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    Thats very interesting..that they would say you cant be both a trader and an investor. I wonder if that is still the interpretation? Things may have changed in 10 years. If it is, that would suggest that you really are dodging bullets keeping all of your purchases in one portfolio. it would seem better to totally ringfence them by forming sep entity with diff gst number etc to bolster your position.
    Quote Originally Posted by winner69 View Post
    Having been through an audit (was nearly 10 years ago) and lost several arguments and having inocme reassessed with the subsequent penalties here is a couple of points that I experienced -

    Mr Winner - we note that you hold some shares that have and probably never will pay a dividend - so the intent really was to make a capital gain wasn't it Mr Winner
    Mr Winner - noble intention of you protecting your capital by selling shares when they start to lose value and rebalancing your portfolio when you become overweight in one some shares ..... but Mr Winner more than60 trades (buys and sells counted separately) a year is more than we would expect from someone whose main aim is generate income (tax paid on this) from a portfolio.
    Sorry Mr Winner you can't have it both ways - if you are a 'trader' you can't be an 'investor' as well .... and yes Mr Winner you are seemed to be a trader and until you can convince us otherwise will always be one.


    Even with professional advice I lost the battle. maybe the record keeping was all the best but I did declare and pay all the dividends I got so I didn't feel guilty but was pissed at the penalties

    This was about the time when things could double (or half) pretty quickly which may have been the motivation for chasing a few like me. I think I got noticed when they went through an IPO and followed up those who sold rather early in the piece

    These days Mr Winner doesn't have any shares in his name - they all go through a company and a family trust with proper record keeping and intent etc but sometimes I sometime wonder if a 'capital' account is really a 'capital' account. My reasoning is that if a tax agent files your tax returns that'll keep the IRD away

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