How Will November Affect Your Portfolio?

Higher rates on capital gains and dividend income
More troubling is the proposal to raise taxes on the income that's most important for stock investors: dividends and capital gains. The current 15% rate could rise to 20%-25% or even higher -- and the fear of that hike may bring an avalanche of year-end selling.

Say, for instance, you own some stocks with nice gains, and you expect to sell them within the next few years in a taxable account. Look what happens if you wait to sell until a higher tax rate comes into effect:

Source: Yahoo Finance. As of Sept. 8. Assumes $10,000 investment in each stock and tax rate increase to 20-25%.Stock
Stock
5-Year Average Annual Return
Current Gain on $10,000 Investment in 2003
Tax If Sell Now
Tax If Sell At Higher Tax Rate
Halliburton (NYSE: HAL)
26.7%
$22,709
$3,406
$4,542-$5,677
Potash Corp. (NYSE: POT)
67.6%
$122,181
$18,327
$24,436-$30,545
Apple (Nasdaq: AAPL)
69.8%
$131,126
$19,669
$26,225-$32,782
Amazon.com (Nasdaq: AMZN)
11.7%
$7,386
$1,108
$1,477-$1,847
Research In Motion (Nasdaq: RIMM)
77.9%
$168,247
$25,237
$33,649-$42,062
Source: Yahoo Finance. As of Sept. 8. Assumes $10,000 investment in each stock and tax rate increase to 20-25%.
Stock
5-Year Average Annual Return
Current Gain on $10,000 Investment in 2003
Tax If Sell Now
Tax If Sell At Higher Tax Rate
Halliburton (NYSE: HAL)
26.7%
$22,709
$3,406
$4,542-$5,677
Potash Corp. (NYSE: POT)
67.6%
$122,181
$18,327
$24,436-$30,545
Apple (Nasdaq: AAPL)
69.8%
$131,126
$19,669
$26,225-$32,782
Amazon.com (Nasdaq: AMZN)
11.7%
$7,386
$1,108
$1,477-$1,847
Research In Motion (Nasdaq: RIMM)
77.9%
$168,247
$25,237
$33,649-$42,062
Source: Yahoo Finance. As of Sept. 8. Assumes $10,000 investment in each stock and tax rate increase to 20-25%.


Source: Yahoo Finance. As of Sept. 8. Assumes $10,000 investment in each stock and tax rate increase to 20-25%.



Faced with the possibility of paying thousands of dollars more in taxes, many investors will sell sooner rather than later.