The Boost: Skip tax season

It’s been a few months since you’ve heard from us. We've been heads down, listening to what you want in a financial app, building it, and improving it 🛠️. Mezzi is your bridge to building wealth faster.

With this new direction, a new newsletter! Each week, we zoom out with investment topics that can help you build wealth faster. No, you won’t hear us recommend cutting back on your coffee purchases ☕. Investing is the most powerful path to building wealth so you can unashamedly enjoy all of your favorite things. Let’s dive in 🚀.

What you need to know

You should evaluate the returns of every stock in your portfolio with these three factors in mind:

  • Appreciation: What’s the potential growth in the stock price?
  • Dividend yield: What might I earn from dividend payouts?
  • Post-tax returns: When selling, what do I give up to taxes?

Why are taxes important?

#1 and #2 may be obvious. Let’s go deeper on #3. Have you thought about how taxes can eat into your gains? First, the basics:

  • Stocks held < 1 year? Gains are taxed as regular income, up to a whopping 37%.
  • Held them > 1 year? Long-term capital gains tax, maxing out at 20%.

For instance, if you invested $100K in an S&P 500 index fund at the beginning of the year, you’re sitting on a nearly 12% or $12,000 return (certainly more than a cup of Joe). If you sold it today, your return dwindles to 7.6% or $7,600 post-tax at the highest short-term capital gains tax rate. And that $4,400 tax bite? If reinvested, it might double in a decade based on historical stock market returns.

By no means should you stay invested in the same stocks forever, unless you love them. Here are some reasons you may want to sell, while still optimizing taxes:

  • You believe the stock will decline in value more than the expected tax rate. 📉
  • You can balance out the gains with losses in other positions ⚖️
  • You need to sell the stock to free up some cash for a big purchase 🏠 🚗.

How can Mezzi help?

We’re all bound to have some losing positions in our portfolio. One of the least used and most effective ways to offset or minimize taxes is selling positions with losses. Doing this across multiple investment accounts is particularly challenging. This is one of the core features we’re building into the new Mezzi. In fact, I recently used Mezzi to uncover over $2K in potential savings across my family’s investment accounts. Stay tuned for more on this topic and how Mezzi can help!