Back in May, one of my favorite Twitter accounts, 10-K Diver, tweeted something amazing.
In his 1989 letter to Berkshire shareholders, Warren Buffett shared a very insightful calculation:
This is an incredibly powerful lesson — one I learned the hard way. It applies to crypto, stocks and just about any other asset. I view capital gains taxes as the enemy of long-term profits. And if you’re trading often, you’re paying a lot of short-term taxes (assuming you make any money at all). In order to beat buy and hold, you simply need to be an incredible trader, which most of us aren’t.
My goal is always to defer the taxes as long as possible. That means making quality investments and holding on to them for as long as possible. The hard part is getting used to just sitting on positions, but when you do, you have a much better chance of making money.
By the way, I was a guest on NPR’s The Indicator program last week. I discussed what’s happening with the crypto market and China’s crypto mining ban. Check it out here.