It is possible to sell a stock the same day you purchase it, provided you find a willing buyer. You may even sell a stock within seconds of purchasing it. Day traders routinely sell securities within hours, minutes or seconds of their purchase, trying to take advantage of short-term price fluctuations and discrepancies.
Although you can sell securities the same day you bought them, the Internal Revenue Service encourages investors not to. If you sell an asset within a year of purchasing it and you make money on the trade, you must pay the short-term capital-gains tax, which is generally the same as your ordinary income tax rate. If you hold on longer than a year, you pay the lower long-term capital-gains rate, which as of 2011 maxed out at 15 percent.
You should also consider the effects of trading costs on your portfolio when you buy and sell so quickly. On every trade you make, you generally must pay a commission or fee to your broker. The more often you trade, the more broker fees will eat into your returns.
If the Financial Industry Regulatory Authority identifies you as a pattern day trader because you routinely make rapid-fire trades of this type, you might have to conform to a separate set of regulations. For example, your trading activities would be taxed as income from a business, rather than from investments. You also would have to keep a minimum of $25,000 equity in your trading account.
You cannot buy and sell most conventional mutual funds on the same day. This is because most open-ended mutual funds calculate their net asset values, or NAVs, only at the close of the trading day. Any trades you make will be netted out at the end of the day, and you will receive only the NAV price.
However, you can buy and sell shares of some mutual funds throughout the day on the stock exchange, just as you would stocks. These are called closed-end funds. Some of these closed-end baskets are pegged to indexes. These index funds that you can buy and sell throughout the day over the exchanges are called exchange-traded funds, or ETFs.
Leslie McClintock has been writing professionally since 2001. She has been published in "Wealth and Retirement Planner," "Senior Market Advisor," "The Annuity Selling Guide," and many other outlets. A licensed life and health insurance agent, McClintock holds a B.A. from the University of Southern California.