Short-term capital gains? Qualified dividends? Tax loss harvesting? Strap in, people, we’re taking a cruise down the chocolate river of all things investment taxes, and I’ll be your Wonka.

Fear of taxes (or maybe just uncertainty) keeps people out of the game, and I think that’s a little bit like declining a raise because you don’t want to pay taxes on the incremental income—if you owe taxes on your investments, it probably means you made money in the first place.

Listen now on your favorite podcast player, or watch the breakdown on YouTube.

My friends, I have good news and I have bad news.

The good news is that investment taxes are a lot simpler and easier than you may expect. The bad news is that you’re about to hate your earned income by comparison.

But let’s start with the best news: Unless you’re retired and drawing down on your retirement accounts, you don’t have to worry about your 401(k)s and IRAs during tax season.

So what does this mean? You can buy and sell and rack up dividends and interest inside these accounts without worrying about paying taxes annually on any of the gains. It’s all tax-sheltered. If you’re going to try your hand at high-frequency day-trading or speculative high-risk bets, maybe the Roth IRA is the right place for it—just ask Peter Thiel! (Just kidding. Please don’t day-trade.)

The TL;DR: If you do all of your investing inside retirement accounts, nothing I’m about to share really applies to your situation. We only need to concern ourselves with investment taxes during our accumulation phase inside taxable brokerage accounts.

If you contributed to a brokerage account over the last 12 months, it’s likely that you experienced some gain or loss (if you managed to create a gain over the last 12 months, call me—I want your trade secrets). For example, if you invested $1,000 in March 2022 and today you have $1,200, that $200 difference is your capital gain. It’s the gain that your capital of $1,000 earned.

For most index fund investors, growth will be composed of two things:

• Capital gains, where the asset went up in value; in other words, it’s worth more now than when you bought it.
• Dividends, which you can think about like a token of appreciation from a company; the company is essentially distributing its profits to shareholders directly, and some companies offer higher “dividend yields” than others. For example, if you buy a $20 share of a company that offers a dividend yield of 5%, you’d earn $1/share.

Capital gains and dividends are taxed differently than earned income—and if you’re just contributing to an account but not selling anything, you won’t pay any taxes on the capital gains.

You only pay taxes on capital gains when you “realize” them, which essentially means when you sell at a gain for any reason. You may be wondering: If I’m selling something within my brokerage account, but then using the money to buy something else and not withdrawing anything, do I still have to pay taxes on the gains? Nice try, but unfortunately, the answer is still yes (bummer, I know).

Even if all the money stays within the confines of the brokerage account, those “realized gains and losses” from buying and selling still trigger a tax event.

Read the full article to understand why, and how all this #jargon works together.

Book. Narrative Economics by Robert Shiller. The free library box in my neighborhood delivered a gift from the econ gods, and when I saw Shiller’s name on a spine tucked inconspicuously amongst the Westerns, I grabbed it and ran. (You may know his name from things like the Case-Shiller index of housing prices or the Shiller PE ratio.) The book is about the way stories shape our economic reality, and it’s surprisingly easy to read, considering its author is a Nobel Prize-winning Yale professor.

Podcast. “We spend 98% of what we make—but we refuse to change our lifestyle” from I Will Teach You to be Rich by Ramit Sethi. Guys, this episode is a WILD ride. Toward the end of the episode, the couple nailed their true issue: “We had all these dreams for our lives…all the kids, the big house, the nice cars…and we just decided we wanted to have it all right now.” I love the way Ramit helps people come to these conclusions on their own.

This TikTok about the difference in parenting between Spain and the US. *hums Rihanna’s “Disturbia” but replacing it with the word suburbia* This video is an interesting breakdown of why being the parent of young children in the US is more isolating and exhausting than elsewhere in the world, and a lot of it boils down to (a lack of) social connection. It aligns nicely with last week’s episode of Derek Thompson’s podcast about the world’s longest happiness study.

“Do you pass the Turing test?” by Haley Nahman. Okay, I’m sorry—I know this is the third (?) week in a row that I’ve shared an article from Maybe Baby, but (!!) this one is living rent-free in my head. She poses the question: Are we the robots? AI is only as predictable and inhuman as we are. The inclusion of the phrase, “Bumping this, thanks!” made me physically shudder while reading.

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It’s not too late to join Jay Jacobs and me at SXSW® this Monday in Austin for a free event!

We’ll be discussing areas that are ripe for investment and how to weather financial storms.

Join us for an evening of networking, financial learnings, and of course, some highly competitive shuffleboard. I’ll be limbering up in the meantime with some bicep curls and spreadsheet formula drills. Consider yourself warned!

Register for free.

(And even if you can’t come to Austin…don’t forget to fill out the aforementioned MWK survey for your chance to win a $250 AmEx gift card!)