Tracy Byrnes, senior writer, and John Rubino, TSC special contributor, chatted on TheStreet.com, Wednesday, Jan. 31 at 5 p.m. EST.

TSC_Tracy: Hello everyone -- thanks for joining us. Hope you have loads of questions ready!

RM_John: Hi everybody. Most of you probably have a stock or two that you wish you'd dumped a year ago. I have, um, several. Maybe we can all learn something today to help next time around.

TSC_Tracy: Hopefully, there won't be a next time!

RM_John: There's always a next time...

TSC_Tracy: Oh so true....

RM_John: Quarterly isn't really the way to look at it.

NoOne says: How long should an investor hold on to stocks that fluctuates quarterly?

RM_John: You'll want to take a longer view. If over the next couple of years you expect the company to do well -- and the market to hold up-- then you're fine.

With a great company, there's no reason to ever sell. Warren Buffett, for instance, likes to say that his holding period is "forever."

chat-guest203 says: The Fed just lowered the prime rate again today. How should this affect whether I sell a stock or not?

TSC_Tracy: It shouldn't if you're a long-term investor. If you're in for the long haul, these rate changes are minor blips on the long-term screen.

RM_John: The bullish case is that when interest rates go down, that raises the value of stocks -- which compete with bonds for investor cash. So historically, lower rates have preceded a bull market.

TSC_Tracy: Finally, some good news!

RM_John: On the other hand, with the economy slowing dramatically, it could be that corporate earnings won't come back in the next six months or so, and investors will get tired of the bad numbers and bail.

TSC_Tracy: That's a way to put a damper on the whole thing.

RM_John: In other words, it's not clear what it means in the year ahead. But in the long run, Tracy is right. Great stock held for long periods of time is the way to go. And the heck with the economy.

TSC_Tracy: Rock on!

chat-guest251 says: What do you think about this tax reimbursement they announced today... how do I get the most money back?

RM_John: That's good for consumer spending, which otherwise might slow too much this year. So it'll help. Depends of course on how much we end up getting back.

A cut in the capital gains tax, which directly affects stock values -- because it's what you pay when you sell at a profit -- would be a big deal for stocks.

TSC_Tracy: I agree with John -- but don't forget, that tax reimbursement has to go through many different hands before it becomes final.

RM_John: But so much negotiation still has to take place that we shouldn't spend this money just yet.

TSC_Tracy: Exactly -- President Bush is fresh off the campaign trail.

RM_John: Sounds like we're on the same page...

TSC_Tracy: So anything goes.

Yes, we are John!

chat-guest1557 says: Could you tell us something about the book [ The Street.Com Guide to Smart Investing in the Internet Era ]? Who it's meant for, what's in it?

TSC_Tracy: The book is meant for anyone who wants to understand these crazy markets.

It's written in fun, easy-to-read language, if I do say so myself. It's for the beginners out there as well as the advanced folks.

RM_John: We put a lot of effort into the part that talks about when to sell because we think it's every bit as important as knowing when to buy.

TSC_Tracy: And in this crazy market -- knowing when to pull the trigger and cut your losses is way tough

RM_John: One of the basic messages of that section is that to know when to sell, you have to understand why you own a stock in the first place. Peter Lynch, author of One Up On Wall Street -- a classic right up there with TheStreet.com's new book, called this "the story." He says to cook your reasoning down to a couple of sentences. And when they change, you re-evaluate.

TSC_Tracy: That's great advice, John

And while taxes should play an integral part of your decision-making, it is not the sole reason to sell a stock.

Make a sound investment decision first, then see if you can get tax benefit from it.

RM_John: Let's take an example of a story changing: If you bought Intel because it was the dominant maker of chips for a market (PCs) that was going to grow forever, you would have been ready to bail when PC demand slowed early in 2000. Despite the fact that all the analysts said buy.

Another example is Cisco. If you bought it because demand for Internet infrastructure was going to grow at 40% a year forever, the implosion of the dot-coms -- major customers of Cisco-- changed the story, and should have caused you to re-evaluate.

chat-guest1557 says: What are some indications that it is a good time to sell?

RM_John: Because each stock's story is different, the indicators are different each time. But the basic ones are growth rates of the things that made you buy in the first place.

If, say, same store sales at Wal-Mart have been growing at 12% each year, and suddenly they drop to 4% -- which happened in the mid-1990s -- then something fundamental has changed. Or chip prices, for a semiconductor stock. If they plunge, then there might be a problem. But the key is to understand which indicators make a stock a good buy.

TSC_Tracy: And let's not forget the psychology of selling: If you can't sleep at night because you're afraid you're going to lose your whole retirement account -- then by all means get rid of it and get your peace of mind back.

chat-guest says: What are some things you have to take into account taxwise after you sell a stock -- you don't just get a bushel of money do ya?

TSC_Tracy: To start, you need to know your original cost basis in the stock -- that is -- what did you pay for it.

That will help you determine if you have a gain or loss on the trade.

If you have a gain -- lucky you -- but hopefully you have generated losses from other trades to offset any tax you would owe on your winnings.

If you have a loss, know that you can only take losses up to the amount of gains you have, plus an additional $3000.

RM_John: Tracy, what if you've been buying a stock for years and sell part of it? How do you know what your cost basis is?

TSC_Tracy: And don't forget about the wash-sale rule....

If you sell a stock at a loss, you should not buy it back within 30 days because you're loss will be disallowed for tax purposes.

Good question, John. Hopefully, you've been keeping track of the different lots of stock you've been purchasing over the years.

If you haven't, then call your broker; the good news is that you then can specially identify which lot to sell.

So, if you can, select the most expensive lot to sell to minimize potential gains -- and thereby minimize your tax bill.

RM_John: Cool.

TSC_Tracy: One more thing -- a good source told me once.... any time you sell a stock -- know that around 30% of your gains will go to Uncle Sam.

That way if you qualify for the long-term 20% rate you'll be pleasantly surprised with the extra money you get to keep.

Of course if you are in the 39.6% bracket -- you'll be really pissed off if it's a short-term gain.

RM_John: Even 20% is still too much...

TSC_Tracy: Just a good ballpark.

chat-guest12 says: Does this type of market make it more difficult to know when to buy and sell?

RM_John: Yes, because we're at the end of an expansion, and that's when things get weird.

For instance, the Fed has eased three times, I think, in the last decade, and each time the market went right up.

But the longer an expansion goes on, the more imbalances build up. People and companies borrow more and more...

And eventually this makes things unstable. That's why you get recessions.

We may or may not be there right now, but it sure does seem like it's getting harder to predict how stocks will react to news, both good and bad.

TSC_Tracy: But John, if you're in it for the long haul and you made solid investment decisions, shouldn't you be somewhat unconcerned.

RM_John: Tracy, absolutely. The best way to be is long and strong. Buy great companies and let 'em ride.

TSC_Tracy: Gotcha.

RM_John: But if they're going down by 50% in the coming year...

TSC_Tracy: True, true, true.

chat-guest1557 says: Why would you want to hold and hold? Isn't the point to make a profit at some point?

TSC_Tracy: Studies have shown that people who bounce in and out of the market actually are worse off -- after paying commissions and taxes.

Of course you want to make a profit -- but what are you investing for?

You need to understand your goals?

If a condo on the golf course is a goal and you invested in sound companies that have continued to show gains over the years it might not make sense to pull your money out now --

RM_John: In other words, if you want to retire rich, then retirement is when you'll want to take your profits. Take them now and you just pay taxes.

TSC_Tracy: He said it much nicer than I did.

But if you need the money for your kid's college education in five years -- than start considering slowly taking money off the table if the time it right.

RM_John: There are times, though, when taking profits does make sense. It's just very hard to know when you're in one of those times.

chat-guest489 says: As for 401K.... is it wise to start a 401K right after college even if you are living almost paycheck to paycheck.... what's the best way for someone in their early 20s to save money?

TSC_Tracy: That is THE best way to start saving because the money is withdraw right from your paycheck and you won't even feel its disappearance.

As a matter of fact, you will pay less overall tax -- because you are taxed on your total wages AFTER 401k contributions are taken out.

And even if it's only 3% per paycheck -- that will compound over the years and you'll retire rich -- without even trying!

And don't forget -- if you're company offers a match.... that means they just give you a certain percentage of your contribution -- then you have to participate in the plan because that's free money for your retirement.

So if your company offers a match up to 3% of your contribution, contributing only 2% leaves free money on the table, and there's no reason to turn down free money from your employer!

Take what you can get.

chat-guest1557 says: What is the wash-sale rule?

TSC_Tracy: Basically -- Uncle Sam does not want you to get a tax benefit if your economic position hasn't changed.

Say you're in Vegas, you walk up to the blackjack table with $100, you win $500 and feel cocky enough to keep playing.

But then you lose it all and you're back to your measly $100.

Your economic position has not changed. The wash-sale rule is the same concept.

If you sell a stock at a loss today, you technically do not owe any taxes -- because we don't pay taxes on losses.

But if you buy the stock right back, you're economic position has not changed --

You still own the stock --

But now you have loss that you can use to offset any other gains you may have generated.

That means you get a benefit. And Uncle Sam generally does not allow benefits.

Hee Hee!

So he makes you wait at least 30 days to buy the shares back --

Then you can use your loss --

BurritoJoe says: Do either of you have any disaster investment stories you can tell us?

RM_John: How much time do you have?

One stands out though. A company called Interdigital. I bought it because it had some good looking wireless patents, and then sat with it for about three years.

The stock didn't move -- even though the story was unchanged--and I sold around $4.

A month later, wireless became the Next Big Thing, and Interdigital hit $80. Come to think of it, the reason I'm on this call from Virginia instead of the Caribbean is that stock.

TSC_Tracy: OK -- here's one to tell your kids -- Back in college I sold shares of Disney to take a cross-country trip.

They were gifted to me, so I made loads of money, but was totally unaware of the tax hit I was going to get the following April.

I had to take a second job just to pay the bill!

Not to mention Disney has since split and doubled a billion times over.

The trip was great though.

RM_John: Thanks everybody, this was great. Bye Tracy!

TSC_Tracy: Hey -- well thanks for joining us. It's been great. And we hope you take a peak at the book -- I think you'll find it really useful!

Bye John!