Today was just the second day of trading for Facebook stock, but the consensus is that the company priced its initial public offering shares too high.
Facebook closed Monday, May 21, at $34.03. That was an 11 percent drop from the $38.23 it ended at on Friday. And that close last week was less than a quarter a share above the price set for the IPO.
Today's drop in price means Mark Zuckerberg's personal fortune fell by around $2 billion. But don't worry about him, the newlywed social media mogul is still worth more than $17 billion.
Plus, Zuckerberg is going to be patient.
The big question is will other Facebook shareholders be willing to give the company time?
When it comes to investing in any stock, financial experts generally advise long-term planning. The reason is twofold.
First, markets and individual stocks go up and down all the time. Folks who try to time their way in and out of investments more often than not lose money.
Secondly, if you wait to cash out and make a profit, you'll face lower taxes.
The current rate on long-term capital gains — assets held for more than a year before being sold — is 15 percent for most taxpayers. For those in the 10 percent and 15 percent tax brackets, there is no tax due on long-term sale profits.
The tax value of bad investments: If, however, you sell a stock or other capital asset for a loss, that also has some tax-saving potential.
You can use your capital losses to offset any capital gains you have during the tax year.
Short-term losses are first subtracted from short-term gains, which are the proceeds from sales made before the 366-day threshold. These profits are taxed at ordinary income tax rates, which could be as high as 35 percent.
Similarly, long-term losses are used to reduce or totally eliminate long-term gains.
If you have some leftover losses in either category, you can use them to net out any remaining gains you might have in either the long- or short-term areas.
You'll have to fill out Form 8949, a new form that appeared with 2011 tax year filings, and the old standby, but redesigned, Schedule D to show the Internal Revenue Service exactly how your losses apply to your gains.
A really bad trading year: What if you still have some stock losses after wiping out your capital gains? You can use up to $3,000 of the losses to reduce your ordinary income.
Got more than three grand in negative accounting on your share sales? You can carry these excess losses forward to future tax years.
Of course, by the time you use them all up to reduce your tax bills, you also should have a new financial adviser, too.
You also might find these items of interest:
Mark Randall @ tax relief
Very surprising that there was a drop considering Facebook is a huge part of the whole world!
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