What are stocks?

When you buy stocks, or shares, you're buying part of a company. A company will offer a number of shares for sale. You can buy some, hold them as long as you like, buy more, or re-sell them.

Buying and selling is also known as trading. Once trading begins, the price of the stock can rise or fall.

Most stock is bought and sold at a stock exchange. Examples of stock exchanges are Nasdaq, the New York Stock Exchange, and the London Stock Exchange. You can also buy over-the-counter (OTC) stocks, which are not listed on stock exchanges.

You don't buy and sell stocks yourself, but act through a stock broker or brokerage firm. Usually you make the decisions, and the broker represents you on the market. You can also choose to let the broker invest your money for you.

You might buy stock at a low price, and sell at a higher price to make a profit. Or, you might invest in companies that will pay regular dividends over several years, for a more stable flow of income. The stock you buy depends on your financial goals, and your personal investment style.

There are two types of stocks: common, and preferred.

• Common stocks give you voting rights in the company. If you want to stage a hostile takeover, you would buy up as many voting shares in the company as possible. In general, common stocks give you a say in the way the company is run. Dividends fluctuate, depending on the fortunes of the company.

• Preferred stocks return a fixed amount, with regular payments, but you have no voting rights. If the company has financial problems, the dividends on preferred stocks are paid before those of common stocks.

A company pays dividends in cash, or in shares. Taxes may apply to cash dividends.

Price of Stock

What determines the price of stock?

Broadly speaking, the price of stock depends on supply and demand. The more people buying the stock, the more its price rises.

The market price of a stock is not the same as its intrinsic (real) value. A stock price can rise, simply because other people are buying. People may buy in hopes of quick wealth, or because they have emotional ties to the product or service - or, just because everyone else is doing it.

Scams, such as Pump and Dump, take advantage of this. Worthless stocks become inflated in price by increased buyer activity, based on hype and high-pressure sales.

Avoid stock market scams and bad investments, with five simple rules.

1. Research, research, research.
   
   Research is your best friend on the stock market. Usually, companies offering stock for sale must disclose financial statements and other company information. Know the company history, the key players and company structure. Look at past performance, and strategies for the future. Know the industry as well as the company. Examine the economic factors affecting its success or failure.
   
   Never invest in a company or industry you don't understand. If you do, it's not an investment. It's a blind gamble.

2. Put personal feelings aside

   Emotional factors can affect the price of stocks. Often, stock prices are driven by greed, emotion, or pure ignorance.
   
   Keep a cool head. Don't buy out of impulse or passion.
   
   Don't buy into wind power, for example, because you believe in saving the environment. Buy because the company has a solid performance record, a strong demand for its product or service, and good potential for growth and profit.
3. Diversify your stock portfolio
   
   Buy stock in more than one company. If you're just starting out, choose at least three or four different companies. Even the most reliable stocks can take a sudden dip.
   
   For instance, Maple Leaf Foods (MFI) stock was $16 a year ago. Recently, several people died of listeria found in Maple Leaf meats. In August of this year, stock hit an all-time low of $7.60.
   
   MFI stock is now rising again, largely due to investor interest in the low prices. The company has a solid history and will probably bounce back. However, this illustrates the potential for a sudden price dive even in established companies.
   
   If your portfolio includes several investments, you have a backup if one or two do poorly. Even seasoned investors make mistakes, or are subject to factors beyond their control.
4. Know when to hold 'em
   
   If a company's revenues go down, so do the stock prices. Is it temporary, and will the company recover? Wise investors know when to hold their stock, and when to cut losses, and sell.
   
   Don't listen to gossip or rumors. People will offer stock market tips, or claim to know stock market secrets, wink wink nudge nudge. Inform yourself, do your research, and make your own decisions.
5. The greater the risk, the greater the reward
   
   In general, the more risk you're willing to take, the more potential for high return. Also, the more chance the investment will fail, and you lose your money.
   
   Reliable companies command higher stock prices. Returns are less, but so is the risk.
   
   If a stock offers high return with low risk, be wary.

Experiment without Spending

Before investing your hard-earned money, set up a mock portfolio with several stocks. Follow your investments online, and chart their progress. Amend your choices, "buy and sell", and watch them perform in real time, without risking a penny.

What is the Capital Gains Tax?

As usual, the tax man is after a piece of your pie. If you sell your stock at a profit, a capital gains tax applies. Taxes may also apply to stock dividends.

You have a capital gain if you sell your stock for a higher price than you paid. If you sell your stock for less than you paid, it's known as a capital loss.

If you hold your stock for longer than a year, it's a long-term capital gain. Under a year, you have a short-term capital gain. Short term capital gains are taxed as regular income.

Long-term capital gains holders pay a tax of up to 15%. However, in 2008, investors in the 10 - 15% tax bracket paid a long-term rate of 0%. This won't change until the year 2010, when the rate will go back to 15%.

Be aware of the tax advantages or disadvantages of any stock you purchase.

What's Your Investment Style?

Are you a hard-nosed rogue or an armchair softie? Does losing money fill you with stress and worry, or do you hunger for challenge? Are you looking for a quick profit, or a long-term retirement strategy?

Understand yourself and your goals before you invest. Read up on the investment styles and strategies of top investors like Warren Buffett, his mentor Benjamin Graham, and people like Kirk Kerkorian or Jesse Livermore. You'll find that their styles are different, but they all believe in the five simple rules listed above.

Stock Brokers

When you're ready to invest, choose a stockbroker or brokerage firm that you trust. Licensed brokers are either full-service or discount brokers.

• Full-service brokers charge a higher fee. They provide information, details and guidance to the investor.

• Discount brokers charge a lower fee, provide minimal information, and usually don't give any guidance.

Decide on the type of service that's best for you. Again, research is your friend.

With a basic understanding of the stock market, you can make confident, informed decisions, and increase your chances of investment success.

Business would be the greater is they paid less taxes too. For example, if you knew you would have more money to "play" with wouldn't you be willing to take greater risks that would be good for you and for the Government taxes in the end? In my opinion, this way the company would make a lot more money and in the end it would pay even more because of the higher profits!

Let's hope the Government open the eyes quickly!

Tariffs are the import taxes placed on goods entering a country. Most of the time, tariffs are intended to protect the companies and people who produce a similar product within the nation. For example, if American car manufacturers can produce a car that sells for $20,000 and the Koreans can build and sell that same type of car for $12,000, U. S. manufacturers will cry foul. The government will then place a tariff on Korean cars that is high enough to make the American companies competitive. By doing this, it protects the companies and the earnings power of its employees.

The problem with tariffs is that it encourages the other country to take similar action against an import from our nation that is profitable for our businesses and individuals. Thus, their ability to do business in the other nation is damaged. A second problem is that it also reduces the benefits of a competitive market in our country by protecting what might be excessively high prices by our own companies. A third problem is that tariffs can discourage innovation. This is true for our people and for the people that we may want to buy from oversees.

Specific taxes levied by the federal and state governments can also be problematic. Many taxes are item specific. These taxes are often aimed at achieving some goal. Taxes on petroleum products are hoped to reduce the use of these products and cut pollution and the need for foreign imports. Taxes on tobacco products are intended to improve the health of the nation by reducing the number of smokers.

When products from foreign nations are targeted for these types of taxes, it can have the same effect as a tariff. If the tax it too high, retaliation by the offended nation is likely. Unlike tariffs, these types of taxes are sometimes harder to find and can be even harder to rescind. Free trade agreements do not alway address this area because the tax is not intended as a protectionist effort, but is expected to serve some other perceived purpose.

Trade restrictions are another barrier to free trade. Like tariffs, restrictions are definitely targeted in free trade agreements. Restrictions limit the quantity, quality, and type of products that can be imported. For example, opium is a restricted product. It derivatives like heroin are also restricted. Obviously, not too many nations are going to openly complain about these restrictions. However, many complaints come when technology items are put on the list of restricted exports from our nation.

Free trade agreements seek to limit the number of restrictions and eliminate as many tariffs and taxes as possible. An absolute free trade agreement would remove all of these. The United States' agreements with most of the North American nations is about as close to this as it gets. The major benefit of free trade agreements is that we are free to sell our most profitable items in greater quantities to our trading partners. Unfortunately, they get the same benefit.

Free trade encourages and open international market system. Competition and innovation should be increased and overall, prices on desired goods whether domestic or imported should fall. Because of a larger sales market, profits for efficient corporation should rise with expansion. Everyone should smile all of the time. However, because of variations in the price of raw materials and labor, these agreements often favor the nation with the lowest labor cost and the most raw materials.

First you need to work out a tax deal with the government so that you can take care of all medical needs that arise for lower income people and those that cant afford insurance or hospital plus medical care. I believe that if all your companies work together with people and the government this can be accomplished. By doing this it would not only benefit your companies this would just about put and end to the government saying that this can not be done.

I believe that accomplishing this would raise your companies profit base but this would allow all people the best medical care possible. You would be the first companies that could take a step towards putting out your hands to those in need this is what the medical oath is all about healing the sick no matter who they are. I believe that you should set up a board of trustees to handle all the paper work to set up a corporation of doctor`s insurance companies a major hospitals through out the country. By combining your efforts and time this can be accomplished in short order to make sure that every person has some type of medical coverage. This would assure that your future business would be booming for years to come. After all you are Americans like all those who deserve a chance not to worry about how their families medical bills when they can`t afford it. Should we not all put back into the country that we take so much out of.

Now for the food and drug companies this would work for you just by taking advantage of tax breaks that would allow you to set up a cooperation of all major suppliers that would make prescriptions and food available to those who really can`t afford it. You would be able to work out better tax breaks with our government showing them how a true American companies should rally there forces in time of need to assure that no people should have to go hungry or without medicine in times of need.

Just think about how many unfortunate people`s lives you would change not just theirs but imagine how much good fortunate you and respect you would bring your selves now and in the future. Who knows some of these people that you would make a commitment to help might repay you in the future the possibilities are limitless. Do this not because it`s the right thing to do but because were all Americans that should be always be able to count in each other. Once again this would not only prove to our government that these problems can be solved but we can work together people and big companies for the betterment of all America. We need to secure a future for all our major American companies who not only believe that we need more American commitment.

Real estate people and all major building and construction companies this will involve your total commitment to the final phase of this project called lets make a home for all Americans to have and own. All major companies would form a home for all people cooperation that would allow you to make housing for all people but we would once again show our government that if they can`t solve the home less problem we can by working together all of us major companies and the American people. After all shouldn`t we show our government how to lead by example. I figure that even if all major corporations need in this country take just twenty percent of what they donate to get politicians elected every year and put it towards these ideas we could make all America for the better. This does not mean not to support your politicians it just means you could help all of us Americans together and still get our government officials elected to office.

All major corporations would you not only be the first in this country by giving back in a very special way that has never been done before but it would set up major money powers in this country to give back to the people but just imagine how much the publicity would be worth to all your future earnings and this would forever end anyone going without the basics in life I implore you to all get together to think very carefully to what I have written about not only for now but for the future of our country.

This section is for the medical and government people who run the mental health hospitals and other facilities in this country we need your cooperation also to complete this situation that affects not only our mentally ill but our children also you need to get together to form a private and government company to reform the mental heath systems in our country so that no mentally ill person or child ever goes with out the option to receive the best mental health care available whether it private or state.

Private companies should get more tax breaks to a sure that each and every person in our country gets the best care available this would a sure that every body has some place to go when they need mental health care and lower suicide amongst teenagers but I believe that we would prevent any more slaughters like columbine but also Virginia techs from happening in the future. We also need our federal government to put money available to make sure that all state mental health facilities have the best staff available to treat people that really should be hospitalized for treatment this is a must so that each state has the best money can offer this is the job of all Americans to make sure that this happens not just the mentally ill but drug addicts and alcoholics. These are just some thoughts that I can think of to better the American way of life

These are just some of the ideas that could come out of meetings between all major corporations and our government all you need is commitment for the advancement of all Americans

Please read this very carefully I think in would open discussion for change in our country.

These companies are frequently not incorporated because the owner is at risk for nearly everything owned regardless of how it is held. If they are incorporated, they must file taxes like any other corporation and pay corporate rather than personal income taxes. Those companies do not run like sole proprietorships, but more like any other company with well-developed corporate structures.

For the owner/operator of a small business, filing their taxes is not a great deal different than filing personal income taxes. Instead of starting with the front of the 1040 form and a few W-2 forms, the unincorporated sole proprietor begins tax preparation with Schedule C to develop a profit and loss for the business. The owner's name and social security number go at the top of the form.

If the business has a name separate from the owner's, it will need to be listed. The type of business is asked for on the form. The owner has to designate whether the business is on a cash basis or uses accruals. If the company is a retail outlet or has retail as a part of the business, the form will need to know the income of the company less the cost of goods sold.

If it is not a retail operation, there will not be a cost of goods sold. From here, a somewhat itemized list of expenses by preset designations need to be listed. Any variations from the headings provided need to be specified. The final few lines of the expense section allow the sole proprietor to list expenses specific to this type of business.

The various expenses are total and subtracted from the net income on the upper portion of the schedule. Items like a car used for business purposes or an office in the home may require additional schedules to be completed.

The final net income or loss has to be recorded on the proper line of the front of the current year 1040 form. If there is a profit, it must also be carried to Schedule SE to compute self-employment taxes. This form will call for a reduction of the amount by a set percent followed by the computation of 15.3% of the new total. This number is recorded as taxes due on the back of the 1040 and 1/2 of this number is recorded as an adjustment to income on the bottom of the front of the 1040 form.

If quarterly taxes have been paid, these should be indicated on the correct line of the back of the 1040 form. From this point, the taxes should be filled out as if they are a personal return. Personal deductions may be itemized on Schedule A. Interest and dividend income needs to be documented on the appropriate forms. Stock profit and loss has to documented the same as always.

All other income has to be reported appropriately. Use the adjusted gross income and compute income taxes due. Add and subtract taxes due and taxes paid to arrive at a final total indicating a refund or amount due to the IRS.

Taxable wages have to be reported to the federal government when anyone makes more than $600 in a calendar year or taxes have been withheld. This is true for federal, state, and local income taxes and Social Security/Medicare taxes. Any taxes withheld have to be recorded and sent to the Internal Revenue Service of the correct governmental division.

The forms themselves can be obtained for free in small quantities for small businesses. To produce large numbers of forms automatically, the forms must be purchased as continuous form documents for tractor-feed printers or created by computer program as they are produced. The type of form needed depends on your method of producing them. If you are going to produce your own forms from blank paper, the right type of stock with perforations needs to be secured.

You will need certain information available before beginning to prepare the actual forms. The form requires you to have the employee's name, address, and social security number regardless of whether it is a 1099-misc. or a W-2. You will also need the business name, address, and federal and state identification numbers.

Once you have the identifying information, for W-2 forms, you need to know the amount of taxable wages for all governmental levels affected. You will need to make sure that any non-taxable items are withheld from the appropriate boxes. For example, if you have 401k deductions or deductions for a similar type of retirement account, these wages are not taxable and should be excluded from the taxable wages boxes. The same is true for approved health care type deductions.

The gross wages should be included in the proper box for reference purposes. These wages will only be listed once. The taxable wages must be repeated for federal, state, and local wages in the correct box in that area of the form. The taxes should be listed in the box next to the taxable wages for federal, Social Security/Medicare, state, and local taxes. Once these numbers are in place, the W-2 form is normally complete. If other special cases have been used for your system of payroll, consult with the instructions or an accountant for proper usage. There are too many variable to cover all of them here.

When completing the 1099-misc., the only real information needed after the employee and company data is the taxable wages. Since contract employees have no taxes withheld, there are none to report. The government considers these people to be self-employed.

Some classes of employees are considered self-employed, but should receive a W-2 form and not a 1099-misc. The primary example of this would ministers who receive a salary from a church body. For these employees, the W-2 is filled out with just the taxable wages because no taxes are withheld.

The reason for this oddity is that churches are not taxed. This means they are not liable for the 7.65% of wages that employers remit for Social Security/Medicare taxes. The minister who still participates in the Social Security program is required to pay the entire 15.3% of the tax just as self-employed people do.

A copy of all W-2 and 1099-misc. forms are kept by the employer and a copy sent to the government. Enough copies of the forms are given to the employees so that a form is available to them for each type of taxes withheld. If the employee worked in multiple states, a separate copy must be given for each state.

The wages and taxes from the forms must be totaled and recorded on a cover sheet. For form W-2, this is a W-3 statement. Only one W-3 is filed regardless of the number of W-2's attached. W-2 forms are to be left as near to continuous-form as possible. Under a separate cover, the employer remits taxes on form 941 to the federal government at the same time.

Other than CPAS, not too many people are keen on taxes. Every year on April 15th, how many people are waiting in line at the post office at 11:59 to send off their tax returns? Chances are that you've been there.

Most Americans wait too long to put together their tax returns and as a result are in a hurry, which can cause errors, missed deductions, and sloppy work. If you begin organizing your taxes well in advance, you'll be in a much better position come tax day.

Organize

Did you find all the receipts and records that you needed for your last tax return? There always seems to be that one (or more) necessary receipt that you just can't find when you needed. Take time now to organize all your necessary information such as pay stubs, receipts, charitable contribution records, and other necessary documents. This will help you next year by having all the necessary information readily available.

Plan Deductions

Tax deductions are available for charitable contributions, IRA contributions, and many other items. When people are filling out their tax returns, they often wish they would have made these deductions the previous year so that they could benefit from them. Think now which of these deductions you would like to make and plan to make them before December 31.

Get Advice Early

People often go to accountants to prepare their tax returns. However, go now and ask for advice for your next year's return. This is especially crucial if you are self-employed or run your own business. Ask an accountant what steps you should take to be in the most tax advantageous position come April 15 next year.

Also, while most people think of accountants for tax advice, there are other sources. It may also be prudent to ask the advice of a tax attorney. These attorneys often know the intricacies of the tax code as well, if not better, than an accountant.

Relax

If you prepare for next year's tax return this year, you may very well be able to send off your tax return before the end of next January. Imagine that feeling. Knowing that you do not have to worry about staying up all night on April 15th to try and hastily complete your tax return. Also, the sooner you send off your tax return, the sooner you will get your refund check. While others are worrying about if they have kept all the necessary records and know which deductions to take, you can take your tax refund and go on a well deserved vaction.

Trading means buying goods and selling. So it is mostly business. But Investing is looking for the growth of assets.

Both are same if we look from short term perspective. But on the long run trading is a business and investing is not so. The tax structure for both is not same.

Tax for the profits made in trading (or investments of short term) is similar to that for profits made from business. This is higher compared to the tax for profits made from investing. There are no taxes for investments which are longer than a year. This rule is going to be changed in many countries.

Investments involve buying/selling assets and holding them for the long term. The assets can be depreciating in nature or appreciating.

In the share market trading refers to buying and selling of share in a duration of less than a month. Where as investments range from more than a month till the shares are sold. If the shares are held for more than a year then taxes are null on the returns. This ideas is particularly useful for those who earn money regularly and invest regularly for the long term. For the short term investors (traders) it is very important to consider the effects of tax before doing business.

Failure to regularly review your will. You should review your will with your attorney whenever there are major changes in your life, or every two to three years. Has the executor or some other person named in your will died, or become incapacitated? Are there new family members since the last will? Have your purchased or sold property?

Not having a power of attorney or healthcare advance directives. Without a power of attorney, simple tasks like filing a property insurance claim may become impossible. A property owner who suffers a period of incapacity, may find that without a Power of Attorney there is no one authorized to collect rent, or to institute an eviction action against tenants who fail to pay rent. And without advance directives, your final illness may not be managed as you had hoped.

Failure to name a beneficiary, and an alternate beneficiary on your insurance policies. Life insurance benefits are tax-free if they are paid to a named beneficiary. Otherwise they may be taxable, and sometimes, undesignated insurance proceeds can only be released after a probate process.

Not keeping copies of beneficiary designations . Your insurance policies, bank and brokerage accounts, IRAs, 401(K) accounts, and other assets will usually go to a specifically designated beneficiary irrespective of what your will says. But if the institutions holding those assets misplace the beneficiary designations, your desired beneficiaries may have a problem, and a costly one at that. Banks, insurance and mutual fund companies merge, or sell assets. Therefore, the burden is really on you to keep track of all your paperwork. When you send in beneficiary designations, always request that the company send you back an acknowledged copy of the designation.

Naming your estate as your IRA beneficiary, or failing to designate a beneficiary for your IRA . Such a mistake may mean that the IRA must be emptied immediately, with heirs losing the benefits of further tax deferral. Otherwise, even a nonspouse beneficiary may be able to stretch withdrawals of several years, adding thousands of dollars to the inheritance.

Assuming trusts are only for rich people. Your eighteen-year-old heir may be able to vote, or to serve in the military. But is she really ready to handle thousands of dollars. Some are, and others aren't. You can postpone the age at which she receives here inheritance by setting up a simple trust in your will. Name a trustee you can rely on to pay her income and to invade the trust principal for her only when necessary.

Failure to leave a letter of Instruction. When someone dies, that's when loved ones are least in a position to go searching for assets and important legal documents. This also is the time when individual feelings may be raw and closest to the surface. Sudden disputes about Dad's intent or what Mom would have wanted can permanently split families. The letter of instruction ties up your entire estate plan in a way that reduces the likelihood of family squabbles, and assures an orderly transfer of your assets.