Question

1) How might taxes impact one's investment plans?

2) What's margin trading?

Answer 1

1.

First of all, taxes reduce your investable income, that is, the amount of income you can invest. When you pay taxes before you invest, you have less money to invest into the stock market and other investments.

If you have less money to invest, then you don’t earn as high a return. It’s that simple.

The good news is, there are ways to reduce the impact of taxes on your investable income. If you are saving for retirement, you can use tax-advantaged accounts.

Accounts like Traditional IRAs and 401(k)s can help you set aside money for investing before you pay taxes, providing you with more capital to invest now. If you are self-employed, owning a business, you can also look into the possibilities associated with SEP IRAs and Solo 401(k)s. These retirement vehicles allow you to set aside more overall.

2. Margin Trading is buying stocks by partly putting in one's own money and the rest being funded by the broker. Carry delivery position beyond 7 days, by paying only a small percentage of the security's value known as margin amount. In case you wish to take delivery you just need to repay the funded portion. Interest will be charged on the funded amount/Debit amount. Margin can be paid in the form cash or MTF approved stock as collateral.