With only $300 you could be in the rich men world

With only $300 you could be in the rich men world

You do not have to be rich to trade in the Forex market. Everybody deserves to be able to protect his or her financial future, and the Forex market makes this possible by offering an extremely low barrier to entry. In fact, you can open a Forex account with as little as $300.

Profit Potential

It doesn’t matter if the value of the U.S. dollar is going up or down.

You can make money in the Forex market. If you think its value is going up, you simply buy the U.S. dollar and make money all the way up. If you think its value is going down, you simply sell the U.S. dollar and make money all the way down.

Tax Advantages

When you invest in most financial markets, you must pay short-term capital gains tax if you take your profits within one year of purchasing a security. If you hold the security for more than one year before taking your profits, you must pay long-term capital gains tax.

Currently, short-term capital gains are taxed at your current tax rate, and long-term capital gains are taxed at only 15 percent. Obviously, it is much better to pay less in taxes. In the Forex market—much to investors’ delight—it doesn’t matter if you take your profits one minute after you enter a trade or one month after you enter a trade.

Sixty percent of your profits are taxed at long-term capital gains rates, while only 40 percent of your profits are taxed at short-term capital gains rates. That means you keep more of your profits in your pockets.

For example, imagine you made $10,000 on a six-month trade in the stock market and that you also made $10,000 on a six-month trade in the Forex market. Both trades occurred in taxable accounts, so you owe taxes on both. Assume you are in the 33 percent tax bracket.

Tax Treatment of the Stock Market

Since you entered and exited your trade in the stock market within six months, you will have to pay short-term capital gains tax. If you are in the 33 percent tax bracket, you will have to pay 33 percent tax on of the profits. So for a profit of $10,000, you will end up paying $3,300 in taxes.

$10,000  33% = $3,300

While you did get to keep $6,700 of the original $10,000 profit, it is never fun to pay taxes.

Tax Advantages of the Forex Market

We all want to keep as much of our profit as we possibly can, and the Forex market allows us to do that. Even though you entered and exited your trade in the Forex market within six months—just as you did for your stock trade—only a portion (40 percent) of your profits is taxed as shortterm capital gains.

The remaining 60 percent of your profits get the benefit of being taxed as long-term capital gains. This means that you will have to pay 33 percent on only $4,000 and—according to current long-term capital gains rates—15 percent on $6,000.

Portion Taxed as Short-Term Capital Gains

$10,000  40% = $4,000

$4,000  33% = $1,320

Portion Taxed as Long-Term Capital Gains

$10,000  60% = $6,000

$6,000  15% = $900

Total Taxes Paid

$1,320 + $900 = $2,220

You would have to pay only $2,220 with your Forex trade compared to the $3,300 you would have to pay with your stock trade.

That is a savings of slightly more than 35 percent. Tax savings like that can add up quickly.

You can also accumulate profits quickly by investing in the Forex market within your IRA or other tax-deferred retirement account. Many investors are unaware they can trade anything but stocks and mutual funds within their retirement accounts because their brokers have conditioned them to focus only on these asset categories. Some brokers don’t want to deal with the extra work that would come from allowing you to invest more freely.

It isn’t advantageous for them. On the other hand, other brokers believe that you should be able to choose where you put your money.

Check with your brokerage firm and see if it offers self-directed options in its retirement accounts.