1. Must I pay income tax before investing my bitcoin earnings to stocks?
You have to pay capital gains tax. Short-term capital gains (less than one year?) counts as income. Long-term capital gains have their own special tax treatment that is superior. In most cases you will pay 0%, though if you are dealing with big money you will pay 20%.
2. How profitable can stocks be?
No where near as profitable as bitcoin. I have a tiny percentage of my wealth in stocks but only as a diversification tactic.
3. This is probably lame but: what stocks would you suggest to buy?
We are entering the information age. So my strategy has been to buy information. Not so-called "data companies" because they don't actually have any data. I buy stocks in companies that have big databases, for example Amazon, ADP, Pearson, etc... I view the fact that these databases come with a company attached as a bonus.
I also want to invest in robotics companies so I have invested in iRobot. I can't find any other public robotics companies to invest in.
I invested in a corrupt utility company (Pepco) that services a growing metro area (DC). More government jobs = more DC residents = more revenue for Pepco.
I wouldn't own stocks to trade them but to get the dividends. However, I have no idea how profitable stocks are in that sense. Can anyone tell me how much money I should invest in some nice stocks in order for them to earn me noticeable dividends?
If you want noticeable dividends you need to invest in stocks with a low PE ratio. If you have a stock with a PE ratio of 8 that means that you need to invest $8 to get $1 per year. Most of my stocks have a high PE ratio (meaning low dividends) but that is normal with stocks that are expected to go up in value.
When choosing stocks I first made a list of companies that I was interested in. More than half of them I had to take off of the list because they weren't public. Then I looked at their market caps and compared them to each other and other companies in the same industry and in different industries. This gave me a sense of how big companies are and how big they should be. So I got a sense of their potential for growth, stability, or decline.
Then I looked at PE ratio to get a sense of what other investors think about a stock. A very high PE ratio means that other investors think that the company is going to have a major expansion. For example I was thinking about buying Whole Foods stock, because I think that their company will double or triple in size. However the PE ratio was very high compared to other stocks in their sector, indicating that other investors think that Whole Foods will do much better than double or triple. So while I am bullish on Whole Foods I decided to skip buying that stock, because the market is even more bullish than I am.
Also I don't let my personal views cloud my judgment. I hate Pepco. They are incompetent and corrupt. I am also opposed to Pearson Education and their tie in with the Common Core. That doesn't stop me from investing in these companies. They will continue to be profitable, I might as well get a share of their blood money.
