Investing Poker Winnings

[theBruiser500]

Here is my situation. I am 19 and go to UMass Amherst which costs about $14k a year. So far I've taken out a sallie mae loan though which is interest free and which I can repay in low monthly payments when I graduate. This upcoming year I could pay tuition with my poker wnnings or just take out more loans, I see no reason not to just take out more loans and invest my poker winnings.

I'm up about 25k now and guess I need to start paying taxes. Every thread I've glanced over on 2+2 says there is no way to avoid paying taxes and it is not a good idea to get in trouble with the IRS. I have no idea where to start with this, what should I do? Are there any tax breaks I can get, like maybe money I use to pay for college is not taxed? That sounds like something that might exist.

I plan on making a lot of money at poker over the upcoming years and I want to start investing it. I will be using a lot of my money to just enjoy but using it to have fun with may be 1/2 a year from now or whatever so I can invest it in the meantime. Also I want to save money for when I'm out of college for a place to live, food, car, whatever. And money for the long term. Not sure where to start with all of this either. Should I just put it into an etrade accoutn and start investing, any specific types of investing I should look into? I heard IRA's are good because they are tax free.

I want to get good with the stock market. How should I learn about it, what should I read. Any good book recommendations, or just walls treet journal or what?

thanks

[moondogg]

If you're not going to pay interest on the loans, pay them off as slow as possible.

As far as taxes, go to a tax accountant, preferably one with some experience with gambling winnings. With your winnings, you can afford one. You can search the forums for a whole lot of discussions on the topic, but most of the advice and opinions (mine included) are not expert opinions. Pay for an expert.

Book wise, I would say to read "The Millionaire Next Door" and "The Only Investment Guide You'll Ever Need". Despite the title of the latter, you'll need a lot more books eventually, but they do give you a good overview of saving and investing. The investment guide is kind of a WLLH for personal investing. After that, you'll probably just be investing in index funds. If you want to get deeper into the stock market (or get start getting tempted into "active trading"), read "The Intelligent Investor" by Benjamin Graham. It's a little dull, but most good advice is dull.

An IRA is a great investment, as long as you don't need the money for a few decades. If you're going to get a "real" job when graduate, make the maximum contribution to your 401(k). If you're not getting a job, open either a traditional IRA or a Roth (you may not qualify for a Roth). In the meantime, make sure you have a year's worth of living expenses saved in cash or near-cash (get an savings account from ING Direct or a money market from Netbank).

[playerfl]

you need to keep 4 things in mind:

1. in the stock market, you are a total fish.

2. the stock market is very risky right now, even for experts.

3. you will not stop playing poker and you will eventually have a losing streak.

4. I suggest you simply spend some of the money. You should get some kind of real world present moment benefit and not just look at it as game credits.

[theBruiser500]

playerf, i will spend some of the money as i said, but i also want to invest some of it. i know i am new to the stock market (alhtough i have invested before, went broke once, made a lot when the stock market boomed, then lost my profits, then made some back and cashed out). i am not averse to a risy investment, in fact i do not want to invest all of my money conservatively. i am willing to get in there and gamble with my money. what about real estate or foreign currencies? granted i knwo nothing about them, i am willing to learn and don't mind losing some of my money in the process.

[playerfl]

I am guessing that you play something like $10/$20 in poker.
when you first started out in poker, did you play $10/$20 right off the bat ? Probably not.

The way to start out in the market is not by jumping straight into speculation. You should learn the fundamentals of investing in stocks, bonds, and mutual funds. If you want to gamble, do it in a live casino where at least you will have fun and free drinks.

If you insist on gambling on the market, i recommend www.tradesports.com. You can bet on indexes, currencies, commoddities, sports, etc. and it works like a futures market. See how it takes you to lose $1,000 and then decide if you want to trade for real.

[element00]

easily solved invest in real estate ... and enjoy tax freedom from that and start building up a corporation(might seem impossible but hardly)

Anyway, go to www.richdadpoordad.com or go to the local book store and get rich dad poor dad. it's an excellent book. live out the dream... you wont need a job after college if you read that and invest : ).. but you'll probably want one to keep busy.

[lu_hawk]

The stock market is a lot like poker. You need to put your money in situations that have a positive EV. When you say you are willing to gamble, you make it seem like you want to put your money in spots where you don't even know what the odds are. Fish can go on runs in poker, if you invest this way any money you make will be from short term luck but over the long term you will not do very well. Learn what you're doing, start small, if you are smart enough to make good money at poker then you are probably smart enough to make money in the stock market, but you need to educate yourself. The poster who said to read 'Intelligent Investor' is right on, there are some others but start out with that.

[midas]

Bruiser:

You're 19, you play poker and you go to school - if you aren't a total loser you have a social life - so you are booked 24/7. You don't have time to manage real estate (unlikely you'll get a mortgage anyway) or watch over stocks(why bother with those returns when your crushing the tables). Pay off your student loans and get that monkey off your back. I'm shocked at the amount of debt that students incur for undergrad degrees and then complain that they can't find work. Being debt free after college will give you freedoms that your leveraged up friends won't be able to afford.

[namknils]

I like Midas' advice. Also you didn't mention anything about credit card debt, but make sure you get rid of any of that before you start investing.

If you want to start something small right now, open a Roth IRA and invest in some long term growth mutual funds. These are to buy and hold, you don't want to be constantly trading them. You pay taxes on the money now and can invest $3,000 a year (next year the limit goes up to $4,000) and it will be tax free when you take it out during retirment. If you start this now and keep it up, your retirement account will be in the millions, see "compound interest".

[moondogg]

[ QUOTE ]
I like Midas' advice. Also you didn't mention anything about credit card debt, but make sure you get rid of any of that before you start investing.

If you want to start something small right now, open a Roth IRA and invest in some long term growth mutual funds. These are to buy and hold, you don't want to be constantly trading them. You pay taxes on the money now and can invest $3,000 a year (next year the limit goes up to $4,000) and it will be tax free when you take it out during retirment. If you start this now and keep it up, your retirement account will be in the millions, see "compound interest".

[/ QUOTE ]

Be careful with a Roth, though. If you're playing a hell of a lot of poker and counting each winning session as a income and each losing session as a deductable loss, the Adjusted Gross Income on your taxes (which would include your wins but not include your losses) might be high enough to disqualify you from getting a Roth. There was some discussion somewhere around here about whether you would really get screwed like this, but I don't think anything intelligent came of it.