Season 3, Episode 12: When do you sell a stock? (And how?)

How selling stocks actually means a tax bill and making even more decisions

Can’t I just sell some stocks to make a bunch of money and then use that money to make more money and then I’ll be rich?

Um. Sort of?

Sara explains how there’s no such thing as free lunch, or, in the stock market world, tax-free income from your clever little (or big) trades.

It’s all fun and games during the year while you’re buying low and selling high with individual stocks, but then, whoops!, there comes April and a tax bill for all of the money you earned for each transaction. Even though it might feel like “fun” money, you actually pay a higher income tax rate for quick trades! They don’t show that in the movies!

Caitlin (AGAIN) asks WTF she should do with her Airbnb stock now that she’s gone to therapy to become un-emotionally attached to it. Sara walks her through selling it at the price she would feel good about, and Caitlin might as well be considered a stock broker now.

Is buying individual stocks really worth it for normal people like you and me? Listen to this episode and decide for yourself.

Ask us your dumb investing and finance questions for Season 3 on our Ask Us page!

We have the social medias!! Here’s our Instagram and Facebook and LinkedIn.

This episode was edited by our co-producer Kelly West. Music by Bad Bad Hats and Devmo.

Caitlin [00:00:07] Welcome to women on the verge of a Financial Breakthrough, a podcast where we're figuring out finance. One dumb question at a time. I'm the dummy. Caitlin Meredith, a coach and mediator based in the Bay area.

Sara [00:00:20] And I'm Sara Glakas. I'm an investor, advisor and founder of Black Barn Financial and the Austin Women's Investing Group, which can be found on Meetup and Facebook. Also, if you can, please leave us a review. This helps other women on the verge find us and we read all of them and they make us happy. Cry like this one from a listener who said proof financial information is not tediously boring. I actually look forward to my two hour commute through the Bay area to listen to them impart funny and meaningful investment information in a way that even this dumb lawyer can understand. We are touched. Thank you. Now let's get started.

Caitlin [00:01:05] Okay, Sara. I got a piece of mail. I want to show it to you. It's from my friends at Morgan Stanley. Oh, yeah?

Sara [00:01:14] Mr. Morgan and Mr. Stanley.

Speaker 3 [00:01:16] Oh, really? I thought the guy's name was Morgan Stanley.

Sara [00:01:19] Like first name Morgan. Last name Stanley. I'm pretty sure it's two last names.

Caitlin [00:01:23] Two guys. Morgan and Stanley. Okay. Yes. And I only have one account with them, which is my Airbnb stocks. Because if everyone will remember, I was invited as a VIP to buy their stocks before they went on the public market, their IPO, which I sort of know what that means. So, if we'll recall, I was allowed to spend $2,500 on the that opportunity by my financial advisor, Sara said that I couldn't go into debt to do it.

Caitlin [00:01:52] Even though I was very ready to do that, to make sure.

Sara [00:01:55] That was not financial advice.

Caitlin [00:01:57] Oh I see. Sorry. Yes. Nothing Sara says in this podcast or in our friendship is supposed to be considered as financial advice. Markets may vary. No results may vary.

Sara [00:02:10] Past performance is not indicative of future results.

Caitlin [00:02:12] Right. Anyway, the point is I started with $2,500, so I got a statement. I actually told them I wanted the paper statements. I'm sorry, Mother Earth, but it forces me to look at it for this one to see what it's doing. So it's showing me that at the beginning, total value of this quarter. Okay. So as of April 1st, 2024, the value of the stocks that I purchased for $2,500 were $6,268.48, so $6,300. So yeah, that's it's more than doubling. It's not quite a triple that right of my initial investment.

Sara [00:02:53] 25 five. Yeah. Not not a yeah.

Caitlin [00:02:57] The listeners can do the math at home. Yeah.

Sara [00:03:00] It's a little more than a double.

Caitlin [00:03:01] We don't want a spoon fed spoon feed. You like this information okay. So that's nice, right? I made myself a little profit. Well, then the ending total as of June 30th of 2024 was $5,761.94. So essentially 5800. And Sara, I'm assuming you're going to call that a blip. Like no biggie went down a few hundred dollars.

Sara [00:03:28] Yeah, I don't get it. Yeah. It doesn't seem on a percentage basis to be maybe it's 10%. Yeah. Which is a normal decline.

Caitlin [00:03:38] Which would be seen as just like a no. So they also gave me this graph. That's Mark. And don't worry people, we're not going to go into into depth of market value over time. And it has been lower than it is now. And it's kind of up 4.6% this June. But it was down 8% in May. So it's kind of gone up and down.

Sara [00:04:02] When was it. When was it highest, what month it was.

Caitlin [00:04:05] At the highest and March of 2024. And then it went down by 4%. So it quickly went down. So, you know, whatever, it's going up and down. So, Sara, I'm thinking, you know, just take my money and run. I've talked about my emotional attachment to this stock, which I think I'm ready to, like, graduate from mature out of an emotional attachment to an Airbnb stock I don't have. Other than being an Airbnb host, I don't have any particular allegiance to this company. And so I'm trying to think through how do I make a decision about selling these individual stocks? The only individual stocks that I have, my my instinct right now is like, take this money and put it in an index fund. Like that was a fun experiment. I did that for a few years, but like put it somewhere safe because this is actually $6,000 could turn into real money down the line. If I have my compounding investment and it's back together with my regular retirement account. What say you, Sara?

Sara [00:05:10] Yeah, I mean, with individual stocks, I think the way that I like to frame it for myself and for the people who own the individual stocks is something like, do you have a good reason to expect that this one company is going to do better than. All of the other companies, right? Or all of the companies that that you would own if you were in an S&P 500 stock? I actually don't know if if Airbnb is in the S&P 500, could probably Google that. Maybe I will. But you're taking the the additional risk with the expectation of additional return that the one company that you are invested in. Yeah. Is better in some way right.

Caitlin [00:06:00] Yeah. And I as you're asking that, I realize that my answer would be different. If you had asked me in 2022, I would have been like.

Caitlin [00:06:07] Oh yeah.

Caitlin [00:06:08] It's better it it like people are ready to travel after the pandemic. My reservations have gone off the hook. I have 0% vacancy rate and my two Airbnb's. So like, yes, this company is killing it right now.

Sara [00:06:21] Yeah.

Caitlin [00:06:22] A couple of years later, people are not desperate to travel. They don't either. They're not spending the money on my specific Airbnbs or Airbnb. Me in general. What I'm getting now is last minute bookings. People from within Texas that are saying, hey, I have business going. I'm going to be there tomorrow in town for three days, not families booking months and ahead not couples booking their special anniversary trip three months ahead. Almost all of them are last minute bookings, which doesn't make me feel super secure about the company. So, how much am I supposed to take that trend to heart? This is so anecdotal.

Sara [00:07:08] Yeah. Did you did you mention once when we talked about this before, that you're on like a Facebook group with other. Oh, yeah. Airbnb hosts. What?

Caitlin [00:07:14] That's what.

Sara [00:07:15] What do they say?

Caitlin [00:07:17] People are hurting. They're like complaining a lot. And other people are having last minute bookings and that, you know, last year everything was full in September already and now they don't have a single booking. So yes, I feel supported in that as not just my one anecdote, but, you know, you say I can't make judgments about the stock market in general because of blips. So it's hard to sort of figure out. But this one company, am I really saying Airbnb is going to be smarter than everyone else in this space and figure it out?

Sara [00:07:46] Yeah. I mean, because like with the with the stock market, you can't predict where the stock market is going to go because it is a combination of all of these different companies. Right. And they're all kind of they're all doing their own thing. But in a group and you're just watching the trend of the group. I do think with individual stocks, you know more about Airbnb than I do. Right? The only things I know about Airbnb is I hate taking out my own garbage. And so I will not, consider staying in an Airbnb unless I'm staying with, like adult friends, right? Because, like, it's because I don't want to take out the garbage like, that is.

Caitlin [00:08:28] Your Airbnb hosts make you take out your own garbage?

Sara [00:08:31] Yes. Did you make your people take out their own garbage?

Caitlin [00:08:34] Ever?

Caitlin [00:08:35] I've never, ever suggested that.

Sara [00:08:37] Wait, but have you heard of this about, like, the list of demands that an Airbnb host will give you to load the dishwasher, run the dishwasher, take out the garbage, strip the linens, you know, clean everything up like I.

Caitlin [00:08:51] I know it's not a vacation anymore, right?

Sara [00:08:53] Airbnb is never my first choice anymore. So that's all I know about myself is like, I'm I'm over it, right? Except in special circumstances. It's not my first choice. So that's how much I know about Airbnb. But what you told me, I think is interesting. A you can see your average rates and that's probably can be extrapolated to all of the rates in Austin. You're competing against the other people in Austin. Be the last minute bookings means that there's more supply and demand.

Caitlin [00:09:23] Yes.

Sara [00:09:24] Right. Is there any expectation in Austin, right. That that corrects itself or nationwide? Like, did we go through this period of time where people across the nation because it became really hot, like flipping houses, right. Like across the country, maybe across the world, people bought properties, turned them into Airbnbs, flooded the market with supply.

Caitlin [00:09:49] Yeah.

Sara [00:09:50] Like is there how do you how do you unwind that? And what does it look like. Because if Airbnb how do they charge you to use the platform. Is it a percentage of.

Caitlin [00:10:01] They charge guests. They charge both of us. So they charge guests a percentage and they charge me a percentage of the profit too. So they rely on transactions happening again and again and again.

Sara [00:10:12] So it's transactions and size of the transactions.

Caitlin [00:10:15] Yeah, definitely. But what you're saying is so interesting to me, and I know we just talked about how like I'm seeing all these headlines for capital cities and places all over the world that are being like, no more Airbnb. Like they're huge. Vocal revolt that in some cases is changing policies and laws and forbidding them. And others. It's just like mass discontent because of a housing crisis and a lack of affordable housing for normal people living in their own cities, because people have made so much money off of Airbnb. So part of it is also like, do I want to be, tied and financially profiting from what I view as a negative thing, happening to the housing market in the city, but also like, the larger question I'm curious about is when you own these individual stocks, what I know you can do a whole class on reading their financial statements. Every, you know, doing sort of a high level analysis of how this company is doing and a gut check. Is this a product people are going to don't want to live without Apple or something like that. It's not going anywhere soon. How we decide when it's a good time to cut our losses and sell. But I just wanted to run you through those two scenarios. So for me right now, I can be like, fuck it, I don't want to own this anymore. I did well, I'm lucky enough that I, you know, doubled, almost tripled. I'm done. I want to put an index fund like that. The adventure is over. So now what? I can just transfer that into my index fund or start an index fund. And Morgan Stanley, how do I literally sell these stocks and convert the money that I have in the stocks to a safe, rational index fund?

Sara [00:12:03] Yeah. So I think that you and I talked about this before, that you own those shares of stock and you're Morgan Stanley brokerage account that's in your name individually. Yeah. It's not a retirement account. It's a regular brokerage account. Right.

Caitlin [00:12:21] Yeah.

Sara [00:12:23] Okay. So if you don't want to own the Airbnb shares anymore, the only way to get rid of them is to give them away or sell them and turn them into cash. So you have to sell those shares of Airbnb, turn them into cash, and then use that cash to buy shares of whatever you want to be in that selling transaction. You will definitely owe capital gains tax on because you you sold something. Whenever you sell an asset, it's a taxable event in some way. Either you made money and you owe capital gains tax or you lost money, and maybe you save on taxes that year through using your losses to offset gains or whatever. That's a different thing. But you can't there's no converting like this to that. You can't just call up Morgan Stanley and be like, like, can you just switch the symbol Airbnb to VTI for the Vanguard Total Stock Market Index fund like you have to? It's a transaction, right?

Caitlin [00:13:28] So I call Morgan Stanley. I'm like, send me a check. You guys are buying back my Airbnb stock. I don't want them anymore.

Sara [00:13:36] And Morgan Stanley is not buying them. They're facilitating that the sale to someone else. So some.

Caitlin [00:13:42] Some other sucker out.

Caitlin [00:13:43] There.

Sara [00:13:44] Right. So the price that you see like I'm looking at it right now. So it's what July 16th. And right now the price is $150.87. $0.95 like that. It changes second by second. So it's somewhere just under 151.

Caitlin [00:14:03] Okay.

Sara [00:14:04] So if you wanted to sell them right now, you would call Morgan Stanley or you would log on to Morgan Stanley and you would place a sell order.

Caitlin [00:14:12] Okay.

Sara [00:14:12] I would like to sell these. You'd it'd probably be a market order, which means that you're going to sell them at whatever the price is right this moment.

Caitlin [00:14:19] Okay.

Sara [00:14:19] Morgan Stanley puts your order into the system, and the system matches your sell order.

Caitlin [00:14:27] Who's just happens to be on their laptop right now being like, you know what, I want to buy some Airbnb stocks.

Sara [00:14:32] I mean, there are millions of people participating in the market right now, okay? And they all have an idea, or a lot of them have an idea of what they want to sell Airbnb forward what they want to buy it for. Okay. And so you have the sellers and the buyers all instantaneously matched up. And if you're going to sell, how many shares is it quantity 38. Yes. So you say I want to sell 38 shares okay. Morgan Stanley puts your shares into the system. Someone else in the world, it's like, oh hey, cool, I need to buy 38 shares or some number of shares.

Caitlin [00:15:08] Yeah, yeah.

Sara [00:15:10] And you guys agree that the price that you're going to make that transaction at is the price that it is right this moment, which is now $150.98. So you get your 151 ish dollars per share, they get your shares and now it's done. You have cash. They have shares.

Caitlin [00:15:31] Okay, so somebody sends me a check for this money, whatever they bought it for. And then I can then call Vanguard and be like, hey, or whatever. I log on and use that money, the 6000 that I now have in my bank account. But surprise, in April I'll get some sort of tax document.

Sara [00:15:52] Yeah, and just a back up a little bit to like, you'll do all this in Morgan Stanley. So you would get the cash sent to your account probably instantaneously by Morgan Stanley. You would then have cash in your Morgan Stanley account.

Caitlin [00:16:04] Oh, okay.

Sara [00:16:04] Your next step is now. Do I keep the Morgan Stanley account? Use the cash to buy shares of something else? Or do I transfer that cash out of Morgan Stanley into my Vanguard account to consolidate things, and then buy shares of whatever you want to buy at Vanguard? Does that make sense? No one sending you a check? Probably.

Caitlin [00:16:27] Oh, okay. That's good to know. Okay, so if I decided the path was look, I'm still on for this individual stock adventure, but I'm deciding I'm out of Airbnb. Like, I think that's going to that's a dying company or that it's just not going to be as profitable. But, you know, what I'm really interested in right now is. I don't can't think of it. ChatGPT.

Caitlin [00:16:52] Is that a company?

Sara [00:16:54] I know it's not a publicly traded company.

Caitlin [00:16:57] Okay, but I.

Caitlin [00:16:58] I'm gonna do some, like, green energy. I don't know, something that I want to buy individual stocks in that. So then I tell, I tell Morgan Stanley, get me as many shares as I can get with this amount of cash that I just received from selling my Airbnb stocks. I keep it at Morgan Stanley. I will still pay taxes on the profit that I made from selling my Airbnb stocks.

Sara [00:17:23] Correct.

Caitlin [00:17:24] Is that correct? Which will be the difference between however much cash I receive and the $2,500 that I initially paid for the stock. So whatever that ends up being for $1,000. I will pay capital gains on that amount of taxes. Yes. At tax time in April. Okay. There's not a. So yeah I'm no.

Sara [00:17:45] So don't forget that you're going to put capital gains.

Caitlin [00:17:47] Tax and some aside to pay whatever that tax might be. It can't be more than $4,000 right.

Caitlin [00:17:54] Like I'll be able.

Sara [00:17:56] To afford it. Right. It would be, what, $4,000 times? You're probably in the 15% long term capital gains tax bracket. So you probably have 600 bucks okay. Okay. That's not tax advice, but it's just.

Caitlin [00:18:08] That results may vary.

Caitlin [00:18:10] Okay. Okay. So I put that aside in my hidey hole.

Caitlin [00:18:16] That Stacey says I shouldn't have put that to pay that tax. And then I'm like, I'm going to get another individual stock for a growth company that I really believe in. Okay. There's my tax journey. I can keep it at Morgan Stanley. But alternatively I say, okay, Morgan Stanley, I'm closing this account. Send me a check for what that is. Then I myself invest in my own Vanguard retirement account like I would any way with that. So it's a separate thing. I pay taxes on it. So people who buy a lot of individual stock, are they always doing this math for how much taxes they're going to have to pay? Like are they not selling them because they're like the capital gains. So they're stuck with them forever?

Sara [00:19:01] Yeah, it's it's a it can be a big problem because you're, you're keeping yourself from doing something you otherwise would because you're going to owe so much in taxes. Right? Because like I just told you that the price for Airbnb shares were about $151 per share. But it's not. It's less than that, right? It's like what you actually receive is less than that. And people I mean, we already did a whole tax thing, right? Like people don't like paying taxes no matter who they are. So you can I mean, there are a lot of people in the world who are sitting on shares of I mean, like I, I've seen people with tuck that, I, I've seen people with shares of Nvidia that have a cost basis of less than a dollar because they bought it so long ago, and now it's at 150. I don't know, I'm looking at it.

Caitlin [00:19:55] Oh my God. So so it made a theoretical a lot of money on their stock one.

Sara [00:20:01] It's at 125. But either way like the point is like if you bought it for a dollar and then it's at $125, basically your whole it's all capital gains, right? Like on a percentage basis. So for every share you sell, you'll basically pay capital gains on all of the proceeds. So it can be really difficult. Like and it's really, really hard to get around if you sell the shares in order to diversify, you will, tax on the capital gains. You can donate shares of appreciated stock to a charity. So a lot of people will do that. They'll take their shares and they'll contribute them to maybe a donor advised fund. And then you can sell the the shares in the fund without paying capital gains. But you have to donate, you have to donate the shares and then you have to donate them to charity. Right.

Caitlin [00:20:52] This is the lengths people will go to to not the psychological resistance to paying taxes. Money, even that's real will be making money.

Sara [00:21:01] Yes.

Caitlin [00:21:03] Okay. And there's nothing to stop me from. Okay, Morgan Stanley, sell my Airbnb stock. I'm going to calculate how much I'm going to owe and taxes for that. So actually, just write me a check for the $600 I'm going to have to pay in taxes. So I have that in my hidey hole and then invest what's left over in different stocks so I can use part of the money from selling the stocks to pay those taxes.

Sara [00:21:30] Oh, totally. Yes.

Caitlin [00:21:31] So the money's there. Yes.

Caitlin [00:21:33] They just don't want it going to taxes.

Sara [00:21:35] Yes.

Caitlin [00:21:36] Okay.

Caitlin [00:21:38] I find this fascinating, Sara. And I've never thought about it. And I don't think we've ever talked about it because we're always talking on the front end of the risk of buying stocks. Like if things go poorly, like you have all your eggs in that basket and that sucks. So it's just much safer. Put it in an index fund. It's safer at the front end. I never thought about this other part, which is the other. The other end of that spectrum is you do so well, but then you're going to have to spend so much on taxes to actually access that money that psychologically, you might as well not have the money at all.

Sara [00:22:13] It's, it's it's it's tricky. It's really hard. So people like a lot of times in in the financial news they'll report on, I don't, let's say like Mark Zuckerberg sold so many shares of meta. Right. But he has like a zillion shares. He sold some shares. So some people will try to spin it like. Oh, he must think something bad's going to happen. He's selling shares when really, it's probably a program to sell a certain amount every quarter so that he's not only in meta shares for the rest of his life, because even someone like Mark Zuckerberg, like he has other things going on that he needs money for, right? So a lot of times like will propose or will put together like a programmatic sell, it's kind of like, you know, how you talked about dollar cost averaging where you buy a little bit each month. It's like, hey, what if we sold a little bit each month, right? We know we're going to pay taxes, but that's just the cost of doing business, right?

Caitlin [00:23:09] It's a cost of being so goddamn rich. Okay. So you are selling little bits over time every quarter, let's say, knowing you'll pay taxes on it. But without if you don't do that, you won't be diversified. So it's a way of reinvesting, take the money out for taxes and then reinvest the other thing in something that diversifies your. And that takes a lot of active management and thinking through an advisor like you and keeping track of your taxes, whereas if you just put it in your frickin index fund. All of that would be managed.

Sara [00:23:45] Well, I mean, in the index fund, if you invested in an index fund in your Morgan Stanley account, you have the same problem.

Caitlin [00:23:54] Right. Right, right. Right, right. It's not just that it's an individual stock. It's that it's not in a retirement account.

Sara [00:24:01] Right? Like you will tax protected. Exactly. So it's it's might not be as big of a problem because you do get rid of the. Well, what if this particular company isn't as good in the future as it was in the past? With an index fund, you're like, well, it doesn't matter. Like whether it's Airbnb or some new thing or Apple or Microsoft, whoever, like it doesn't matter. It's all in one box. Whereas with Airbnb, if you have stocks typically move in the same direction just because they're stocks. And what if Airbnb specifically does something awesome or, doesn't do something awesome? So you're exposed to the risk associated with that particular company or its CEO or its business model, or the regulation risk that you mentioned. Right. Yeah. So you're layering that on top of just the regular risk of like, oh, it's the stock market that, you know.

Caitlin [00:25:01] Right. It's pretty.

Sara [00:25:02] Volatile.

Caitlin [00:25:03] Who knows. Okay Sara this is mind blowing because it's so you're telling me that if my $2,500 had turned into $100,000 right now, the episode we'd be recording now is me. Me? Like, I can't fucking stomach paying $30,000 in taxes on this money. I need the money. I want to sell it. But like what? I'm going to pay them 30,000.

Caitlin [00:25:29] It's all imaginary. It's all I didn't deserve this money. Like what? It's all.

Caitlin [00:25:37] This is so crazy. So the thing that you're hoping for that your stock, like your individual stocks or your, your your investments that are outside of a tax protected account or your retirement account, you're hoping will do amazing, but then you're just getting into another trap. Perhaps if you're somebody like most people that are like, oh God, I want to avoid paying more than I have to for anything, it's my like, should I sell my house all over again?

Sara [00:26:03] It is. It is like with your house though, you can only sell. You have the one house with your Airbnb stock. You could theoretically say, hey, listen, I've doubled my money. I'm of my 38 stocks. I'm going to sell half and reinvest that money, and I'm to keep half right. So you can split the difference with stocks because they come in smaller increments. So it's not sell sell it all or keep it all. You could say well I don't know if I want to sell it all because then I'll always be wondering what happened. But I also don't really like $6,000 is a lot of money, right? Maybe I'll keep 3000 in there and then reinvest 3000 and come back to it another day. So that is one of the benefits of.

Caitlin [00:26:49] Stock I got. So it's not a black and white I like to think of black and white. So I'm not accustomed to this whole there's a third option okay.

Caitlin [00:26:56] Nuance. So yes.

Caitlin [00:26:58] Okay. So when you have clients coming in that are like I want to invest all this and you know, in my private brokerage account, are you like, okay, let's talk about taxes right now. Like you need to know going into this that I can move your money. We can like change with the market. We can be really nimble, but you just have to, like, stomach the fact right now you will be paying taxes on this and that will be feel like a stumbling block. And I need you to just like stop. It's that's the part of doing business.

Sara [00:27:34] We I typically like having conversations with clients about that. I do like to point out, like the pros and the cons of a regular brokerage account. Right. But the downside is that every time you sell something, there's some sort of taxable event, right? So there are taxes to manage. And when you receive dividends, that's taxable in the year that you get those dividends whether you reinvest them or not. Ideally if you're doing it right you will have capital gains tax to manage in the future. But that's it's knowable. You know what the capital gain is before you realize it, right. So you can know what your tax is before you do it, just like you and I just did. So it's not like.

Caitlin [00:28:15] Oh like yeah.

Caitlin [00:28:16] Mystery coming down the pike. Right.

Sara [00:28:19] But the pros are like, Katelyn, you can sell all that stuff and take the $6,000 minus the $600. You don't own taxes, and you can do whatever you want with it. And you're not 59.5, right? So, like, you're not restricted either by what you can do in that brokerage account. Like if you need the money you can get to it. Whereas in your retirement account, if you put the money into your IRA, you're supposed to wait till you're 59. I have. What if you need it before that? Or what if you want it before that? So there are pros and cons.

Caitlin [00:28:49] You know what you are, Sara. You're the positive reframe person. I still think about it all the time. What you said about my house where I'm.

Caitlin [00:28:57] Like, that's my story. My story is I got this great deal.

Caitlin [00:29:00] On this house, and it was such a good investment. And you're like, yeah, and your story now can be like. And then I sold it and look what I was able to do. Like the story continues with this positive for me.

Caitlin [00:29:12] I just am like and then I'll never have it again and I'll pay all those taxes.

Caitlin [00:29:17] Like I get really bogged down in all of those hurdles that like the cost of doing business stuff that I'm not used to. And you see it as like, yeah, you do that because you're opening yourself up to all these other opportunities.

Sara [00:29:34] Well, thanks.

Caitlin [00:29:35] I mean, I think you really have a good job for it to matches your skill sets.

Sara [00:29:39] I know, and I do. I mean, I think it's true, right? Like, I think you get to see, you know, hundreds or thousands of people on these journeys and people beat themselves up over stuff just constantly. They'll just like, that's the first thing people be like, these are all the terrible things that I've asked I did and all the mistakes that I made. And it's like, we're starting from here with what you have now, and you have this because you did a lot of things, right. And nobody, nobody, nobody, nobody does it. All right. So it's so yeah, I don't know. I think it's cool.

Caitlin [00:30:11] Yeah. And I'm wondering if this tag, this whole tax thing hanging over our heads or whatever, like, have you found people who have an ethos about it that, like, I believe in taxes, it makes our, you know, world work. It gives me street lights out in front of my house, like I really believe in them. And yet, you know, when it comes to.

Caitlin [00:30:33] Me, I'm.

Caitlin [00:30:33] Like, well, other people should.

Caitlin [00:30:34] Be should be paid, which I do believe also that Richard, the richer you are. But isn't this a funny.

Caitlin [00:30:40] Conundrum with money? You have to deal with it all the time. Like the more you have, the more you pay in taxes and the more you don't want to pay in taxes. And it's like, well, that's always been the system. That's how capitalism in our country works. So why are people more used to it?

Sara [00:30:55] I don't I don't know.

Caitlin [00:30:56] Such a.

Caitlin [00:30:56] Fight.

Sara [00:30:57] I don't know it. Is it it's a fight for some people. I mean, it does tend to correlate with your political views as to whether you think of taxation as stealing or whether you think of taxation as just necessary for the common good that we're all in it together, supporting system. And so it very I it very much correlates with political views and how like the vitriol that people feel about it. But I've met plenty of people who are just like, how lucky am I that I have capital gains, right? And I have this other thing that I want to do. I have this other investment that I want to make. I have this trip I want to take, I have this gift I want to give. And so in order to do that next thing, there's a cost associated with it. Right? And thank goodness there is a cost because it means I made money.

Caitlin [00:31:47] Yeah.

Sara [00:31:48] And so like it I mean, I think it really is helpful for kind of executing on your plan and keeping yourself moving forward to be able to do that. Just I mean, another way to reframe it is like a 15% tax on capital gains for most people is less than what they pay on income taxes. Yeah. So the taxes you pay on investments, at least as of now, is lower and sometimes a lot lower than what you pay to actually earn that money trading your time for money at a job. So if you reframe it that way, like again, it's like, how how lucky are you that you get to sell this investment, pay 15% on your capital gains instead of going out and getting a second job and paying 2,432% on the extra paycheck, you don't. It doesn't cost you any time to do that.

Caitlin [00:32:36] And by definition, you already have the money to pay those taxes, right? Like the worst case scenario for me, I always assumed, like to win an amazing car on a game show and then have to pay the taxes.

Caitlin [00:32:48] For it because like, yeah, you don't. Just because you won a car doesn't mean you have.

Caitlin [00:32:52] $15,000 to pay extra in tax. Exactly.

Sara [00:32:56] Yes.

Caitlin [00:32:57] It's so that's really being sucker punched like blindsided by a tax bill that you absolutely couldn't have predicted, didn't want to the point where you have to sell the car because you can't afford to win a free car.

Sara [00:33:09] Yes, exactly. Because you're exactly right. Like if you have the stocks in your brokerage account, you can sell the stocks to pay the tax bill. Like there is a way to, yeah, cover that cost through the asset that you have. And so it just takes it it does take a little bit of planning and where people like get very upset is kind of like where we talked about before either not realizing that every sale is a taxable event. So people just starting in the stock market, especially if they're really into trading. Yeah, you're you're short term gains. We've been talking about long term gains, which is for stocks that you hold for longer than a year. There are short term gains for shares that you've owned for less than a year. And those are taxed like a paycheck. Oh, so sometimes people don't realize that all of these things are taxable, that you're doing all of the selling is taxable. And then be don't realize that if you're doing it really fast, then your rate is higher than the 15%. So if I'm in the 24% tax bracket because I have a job.

Caitlin [00:34:16] Yeah.

Sara [00:34:16] And on the side I'm a day trader. Yeah, I get that 1099 at the end of the year and it might say like, hey, congratulations. You made $10,000 trading stocks this year. I probably kept the $10,000 and didn't realize that now I owe. Income tax rates on short term gains, which is more than the 15% at long term. So there are some of these, like you just have to note, like every time you sell something that you own almost across the board, there's some sort of tax implication. Everything you do that makes money is taxable in the U.S..

Caitlin [00:34:53] So except selling your Peloton on Craigslist, right.

Sara [00:34:56] But maybe you didn't make money on it.

Caitlin [00:34:58] You probably know that it's actually okay. Yeah yeah yeah yeah. Okay. Getting it. Okay. Wait a second.

Caitlin [00:35:06] Sara. Sara. Sara. So I'm connecting this now to what Jackie told us in the high school one. And we've talked about before, which I always called round robin, but it's not Robin Hood. Oh, yeah. Where people that got really into penny stocks or day trading through these apps, the gamification of, like, these stocks are all fun. They feel amazing. And yet that big surprise at the end of the year that they actually if you made money, you have to pay taxes on it.

Sara [00:35:35] Yeah. Like assume you get to keep 75% of what you made and then see if it was worth it.

Caitlin [00:35:40] Okay.

Caitlin [00:35:41] Oh wow. That's so dumb. Is fighting words okay.

Sara [00:35:44] And because it almost never is unless you're it's like huge amounts of dollars and it's like, where did the huge amounts of dollars like, the wealthy people don't typically day trade. So it's usually like people who are I'm starting with $1,000 and I'm trying to turn it into $1 million. Right.

Caitlin [00:36:00] Yeah.

Sara [00:36:01] A it's super duper hard. And B, if you're able to do it, you're going to you're going to owe a lot in taxes.

Caitlin [00:36:08] So because you're going to be in front of a screen that entire year. But okay. And that the second piece of it that you have to pay taxes at all, but also that if you're reaping your profits within the year that you bought the stock, the share of the stock, you then have a higher tax rate than people who don't do those quick turnovers. Yeah. So it's a double whammy.

Caitlin [00:36:35] Yep. Okay.

Caitlin [00:36:37] Okay. Well, let's I'm just going to I'm going to take this all under advisement, but I was very curious about like, we've talked about how to pick the stocks and then also how I could I didn't think I would ever be able to sell the Airbnb stock because of my emotional.

Caitlin [00:36:53] Attachment to it. And you said that that it's also true, like people's dads.

Caitlin [00:36:57] Who work for companies, like they never want to sell it. So I feel I'm not alone. You see me there, but I hadn't really thought about like, well, if I actually do sell this stock, what will that actually mean? Now I know.

Sara [00:37:10] Yeah. Are you going to do it?

Caitlin [00:37:12] I mean, now it's on the order of. It's on my to do list. So will I get to something.

Caitlin [00:37:16] On my to do list or not? Like, am I emotionally.

Caitlin [00:37:20] Ready to do it? Oh, but I had one last question. Okay. So you said you'll probably just like, I'll go in and just like market rate right now. I could, if I was more sophisticated, had more time and cared more. I could also say like, okay, I want to sell it, but I want to get a good I want to feel good about selling it. So I want it to be worth $170. I want to make $170 per share. So there's some configuration where I call Morgan Stanley or I put it in, I'm like, yes, I want to sell it, but I want to sell it when I can get this amount for it. Yes.

Sara [00:37:55] That's called a limit order. Okay. So so when you go to sell, if you're doing it, if you're doing it yourself on your through your account, when you hit sell, your next option that you'll need to toggle through is, well, how do you want to sell it. There might be a whole bunch of order types, but the two the most common by far is market. That just means at whatever price it is right now. And then the second most common is a limit order. So I want to sell it, but only if it hits 170.

Caitlin [00:38:28] Okay. Is that for normal people?

Sara [00:38:31] If I think it's me. Yeah, I do think it's for normal people like who have an idea of what they're talking about. Right?

Caitlin [00:38:39] So not.

Caitlin [00:38:39] Me.

Sara [00:38:41] You might. I mean, I think I would look sideways filing.

Caitlin [00:38:45] Thinking about how to delicately proceed from. Okay.

Sara [00:38:50] Like, have you ever looked at a chart of Airbnb? Do you have any idea as to whether 170 is a lot or a little, based on where it's been in the recent past?

Caitlin [00:39:00] No, but I'm going to just say that that's a challenge that I could see looking up and seeing like, what is there? What is an individual share been over time looking for the all time high? Looking where it is right now and looking for something in the middle and saying that's what I want to sell it at.

Sara [00:39:24] Yeah, I mean, I think that I, I think that you could do that, right? I'm doing it right now and saying like. You know what? Like 170 might not be that far off. That might be a pretty good target that if you just pulled it up off of your head, that's a really cool coincidence. But if I would look at something like a one year chart and say, like in, in a stock market like we're having now, which is pretty strong, it's probably reasonable to think that this stock could get back to its most recent highs at 170. And then you'd need to have a time limited mind, like how long am I going to give it? Like, am I going to wait forever?

Caitlin [00:40:01] Three years? Yes. Then any strategy is out the window. But if I say, like, look, I want to sell it in three months, I'd like it to be done by the end of the year, let's say. So I just pay those taxes. It's done by the end of the year. I want that to be done. But I'm not in a hurry right now, and it gives me a psychological victory. Yes, I'm going to sell it. I'm going to pay taxes on it. But you know what I got? Like I got a good price for it.

Sara [00:40:27] I'm not taking just any price. Yeah, this isn't a garage sale. Like I'm not haggling. I'll tell you. Like it's 70.

Caitlin [00:40:33] Airbnb, motherfucker. Like it's a brand name. You gotta pay me. Oh. I'm all of a sudden excited about this. So you think I normal person with, you know, a financial literacy podcast? I could go on the Morgan Stanley website.

Caitlin [00:40:52] It'd be like, hey, I need a limit order. I want to sell it. Here's the time frame. Here's what I'd like to make for it. Yes. Tell me when my check is in the mail. I do send me a check, I get that.

Sara [00:41:04] But yeah, I do, because like the platforms, you only have so many options you'll have. Are you trying to buy or sell? How many shares, what type of order? And as soon as you click limit, another box will pop up that says okay, what price. Oh. And then there and then there's probably another box that says, do you want this? Is this a day order? Is this GTC which is good till canceled. That's probably the one you want. If you want it to sit there in the queue and just automatically it'll automatically trigger once it hits 170 or it will expire and you'll get an email that's like, hey.

Caitlin [00:41:41] Hey.

Sara [00:41:42] Remember that limit order you you placed?

Caitlin [00:41:44] It's totally unreasonable. You shot your.

Sara [00:41:47] Chance. Now it's at 100.

Caitlin [00:41:50] Yes. Oh, God.

Caitlin [00:41:53] Do you know when I put this order on, Morgan say, like, I'm going to feel like the king of Wall Street.

Caitlin [00:41:57] They're going to make a business movie about me.

Sara [00:42:01] The greatest trade ever placed. Caitlin Meredith.

Caitlin [00:42:05] From humble beginnings, not knowing what a stock was in in two years. Placing a limit order. You gotta be kidding me.

Sara [00:42:13] It's going to be like the Big Short two selling your Airbnb stock $6,000.

Caitlin [00:42:22] Yep. That's money. Let's make the money's. What makes the world go round.

Sara [00:42:26] Clicking the buttons is the hardest part for most people. It's like you intuitively know what you want to do, but like then you have to go in and you have to click the buttons. It's intimidating.

Caitlin [00:42:35] The actual thing. No it's true. Okay, I'm going to try it. I'm excited.

Sara [00:42:39] Now. Yes, I am to let you know how it goes. I'm going to set like a little alert on my chart. Like let me know when it hits.

Caitlin [00:42:47] When everybody check in. Yeah, yeah. Like you think ding ding ding.

Caitlin [00:42:51] Okay. Thank you Sara.

Sara [00:42:52] Awesome. Thank you.

Music transition by Bad Bad Hats

Sara Did you have a question about finance or investing? Send it to us in an email or voice memo on our website. Womenontheverge.com.

Caitlin Hey, we want our listeners to know that economic abuse can be subtle, but it's a serious form of control. Watch out for partners who limit your access to money. Sabotage your job or rack up debt in your name. If this sounds familiar, know you're not alone and there's help available. Please learn more at the hotline.org or call 800 799 safe.

Sara This episode was edited by our co-producer Kelly West, with music by Bad Bad Hats and Devmo.

 Music outro by Devmo

Devmo I know the first thing you notice is that I'm covered in gold, the flick of the wrist it could turn a hot bitch cold, to get what you want in life girl you gotta be bold. Now Imma die rich, and I know...

Sara This podcast contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this podcast will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security.