What percent in short term stock gain to match buy and hold

Question

Say 2 people both like to buy 1 company stock but 1 person buys and sells trying to time earning etc. and other person holds.  What percent per year does the person doing trading have to make above the buy and hold to have equivalent profit?

RonJohn · Accepted Answer

(This is really a comment, but an extended one which should help answer your question.)
Your question is a bit flawed, since the "buy and hold" investor person won't pay any tax since they haven't sold it yet.
(But let's pretend that the investor sells after one year and one day.  Thus, he'll pay Capital Gains Tax: either 0% or 15% or 20% depending on your tax bracket.)
Meanwhile, the trader is generating a tax event every time they sell (after holding less than a year, but it goes without saying that he'll hold for less than a year).
That means he'll be paying ordinary income tax rates on his earnings.
Thus, the simplistic answer is that the trader must make enough to overcome the lower rate that the investor pays.
Getting an actual percentage is highly complicated, and depends on how much the trader and investor earn via normal income, and how successful they are in the market

Bob Baerker · Answer

Assume non sheltered accounts.
If there's a dividend, it's a lower tax rate for the the buy and hold investor (qualified dividend status).  No taxes will be paid on the capital gain until the stock is sold and it will be at the long term rate.
The trader has to pay short term capital gains on trading profits,  a higher tax on dividends, more fees, and more commissions if still paying them.
The major determinant for each person will be their tax bracket.

What percent in short term stock gain to match buy and hold

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