Explanation:
A major benefit in holding an investment for more than a year is that the profit margin is mostly on the high side and the longer the waiting period, the more the return on investment. One other benefit is also that you are able to withstand hard drop in currency due to political economic instability or unfavorable monetary policies.
Answering the question, one of the advantages of holding an investment for over a year instead of selling it in less than a year is that the capital gains on the investment will be taxed at a lower rate
Capital gains refer to the profits or gains that you earn from the sale of capital assets. You don’t pay tax on capital assets until you sell them. Stocks and bonds are examples of capital assets.
If you held Capital assets for over a year, the profits you make from it are regarded as long-term capital gains. The capital gains on the investment will be taxed at a lower rate or you won’t have to pay any tax at all.
For Example: if you purchase a stock that worth $5,000 around April and you sell the stock in November for $5,500, what it means is that you realized a short-term capital gain of $500. Now if you make $38,701 in a year, it means you are within the 22 percent bracket and you have to pay $110 to the IRS out of your $500 capital gains.
Thus, one of the benefits of holding an investment for over a year instead of selling it in less than a year is that the capital gains on the investment will be taxed at a lower rate.
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