Introduction

The mania of meme stocks that started in January with GameStop Corp, shows no signs of slowing down.

The 8th of June saw meme stocks, such as Wendy’s, Clover Health, and AMC Entertainment, go up for a second consecutive day, thanks to the innuendos caused on social media that led to the Wall Street rumblings ever since the start of 2021.

The saying, “Don’t put all your eggs in one basket” has long been considered an effective risk management technique. By diversifying the portfolio, the investment amount is spread out among different assets resulting in higher long-term returns for less risk as compared to committing the amount in a single asset.

As obvious as it may seem to appear, a lot of day traders do not consider investing in alternative markets. This is due to either lack of knowledge about the benefits of diversification or fear of applying a day trading strategy on anything other than the stocks.

Taxes are always a major factor for traders and investors. Anyone who wants to invest in stocks or futures contracts should take into consideration the primary differences in how these investments are taxed. This guide is going to discuss the main tax benefits of trading futures over stocks.

How are Stocks Taxed?

The tax system used for stock investments is quite simple; you only pay tax on any profits you make. This is known as a capital gains tax, and the rate you pay depends on which tax bracket you fall into. If you fall into the 10% or 15% tax bracket, for example, you would pay 0%.