Our mission is to help retail traders advance from being gamblers at a casino to sophisticated traders that can go toe-to-toe with the Buffetts. If we succeed, we'll be empowering traders to get one giant step closer to their dreams of financial freedom.
Over the last year, there's been an enormous influx of retail investors entering the stock market arena, looking to capitalize on the latest bull run. Thanks to apps like Robinhood, millions of new investors were able to create an account and start trading complex, high-risk, high-reward options within minutes. The stories on WallStreetBets certainly illustrated the potential for life-changing earnings, which further instilled this lottery culture that has permeated investing these days. There's a reason why NFTs, DeFi farming, and Pokemon cards have found ample investors. There's a zeitgeist behind the scenes from social economics that millennials and younger likely won't be able to retire unless they 10-100x their money, leading to these all or nothing risky bets.
What's missing from the tales of big wins is the tax burden that comes with it. Most new traders don't think about taxes until they file them (if they file them), but that's a terrible mistake. For starters, not knowing your tax obligation until the following year means you can have a back-breaking tax bill without any time to budget for it. That is what happened to a Robinhood trader, who made only $45,000 in profits but still owed $800,000. How did that happen? He was clueless about an IRS rule called wash sales, which disallows certain losses from being deducted from gains. Imagine using Turbotax or sitting alongside your accountant expecting to have a marginal tax bill, and instead, you find out that you owe $800,000!
Secondly, active tax management throughout the year means that you can make wise investment decisions while minimizing your obligation to the IRS. Here's an example, suppose you owe $5,000 in taxes and notice that you're down $5,000 in your crypto account. You can sell all of it to lock in a $5,000 loss and rebuy it immediately with no penalty since there's no wash sale rule in crypto (yet). So in theory, your total investment account values are identical before and after the transaction yet you now owe $0 instead of $5,000.
Thirdly, there's a substantial difference in tax rates between short-term and long-term capital gains. There's a reason why the 1% get approximately 26% of their yearly income from long-term capital gains - it's way cheaper! Instead of getting taxed at about 38% (for the highest bracket), they'll only pay 23%. While sometimes it makes sense to have short-term trades like if you made a decent profit flipping Dogecoin, investors should aim to hold onto their stocks for at least a year. After your positions are now considered long-term holdings, you can think about selling them in years, in which you have little to no W-2 income to optimize your taxes again since your first $40,000 in long-term gains is tax-free!
Our mission is to help retail traders advance from being gamblers at a casino to sophisticated traders that can go toe-to-toe with the Buffetts. By enabling them with a real-time tax tool, they can make smarter investment decisions and optimize their gains. Over time those tax savings, if reinvested into the market, can compound into a sizable windfall. If we succeed, we'll be empowering traders to get one giant step closer to their dreams of financial freedom.