Individual and joint accounts are generally taxed by the Federal government for both income and realized capital gains.
At First Houston Capital, we manage our portfolios with taxes in mind. We do not jump into and out of the market, creating lots of short-term gains and losses. Rather, our focus is long-term. Our preferred holding period for a stock is forever, hopefully creating capital appreciation that may never be taxed. When we sell, we try to capture the benefits of long-term capital gains. Selling can also limit losses and offset gains elsewhere in the portfolio.
We favor companies with a history of paying dividends to shareholders on a regular basis. Dividend income has historically benefited from a lower tax rate than interest income or ordinary income.
Our portfolios usually hold between 40 and 50 stocks among different economic sectors. This provides efficient diversification without a portfolio looking like an index fund. The ownership of individual stocks allows clients to gift shares to charity or other family members without paying capital gains taxes.
First Houston Capital is not a tax advisor but we do try to run individual and joint accounts as tax efficiently as we can. Please check with your CPA or someone with specialized tax knowledge when seeking tax advice.