"passive index investing and instant cash access are fundamentally opposed": I agree, this is the case right now, but we want to change that, because there isn't any fundamental reason for this.
Yes, people will owe tax, but remember that only your gains are getting taxed. So if you get a tax bill, it's because you made money. That is still a net-positive. There are also a lot of things you can do to reduce (though not eliminate) the tax burdon, such as carefully selection what investments to sell, predicting money flow (e.g. not investing a paycheck if rent is due a day later), tax loss harvesting, etc.
They are opposed. Passive investing requires long waiting and holding, not lots of tx like a checking and cash access require.
Margin against the contents might be better, since you can keep the gains and not pay tax.
> e.g. not investing a paycheck if rent is due a day later
Yea, this is the problem! If you use this as a checking account, then you can't NOT invest it.
However, doing that is really hard, and requires you to micromanage your checking account. I personally (before using FC) had $10-20k in my checking account, because 1) I really want to make sure I don't miss a rent payment because I mess and 2) I don't want to micromanage. So, at least in my situation, some of the money is moving in and out and can't really be invested, but a decent chunk (probably >10k) just sits there. I imagine this is true for many people.
Sounds like if the market is green I'm paying a hefty free for every single checking transaction
Even this is incomplete, because we don't know the other tax situations, was there a tax loss carryover that would/could be applied, etc, etc, etc.
Taxes are complicated.
I can maybe get past the risk since I invest a lot anyways, and cap gains since interest bearing accounts are also taxed as ordinary income, but if every withdrawal causes a reportable sale, how is this not a IRS paperwork nightmare?
"You can aggregate all short-term and all long-term covered transactions and report them as single-line entries directly on Schedule D. A covered transaction is one where your broker provided a 1099-B Form to the IRS that: 1) Show acquisition date and basis and 2) Don’t require any adjustments or codes"
https://www.hrblock.com/tax-center/income/investments/report...
You're going to get users who sign up thinking this is just like a bank account, but with better returns. Then the market will drop 10% when their rent is due tomorrow. Bank rates are so low because the money is always there and insured. Anything without these features should not be called a checking account.
You call yourself Bogle fans, but passive index investing and instant cash access are fundamentally opposed from a time perspective. Finally, this is a tax nightmare. People will think they have huge gains in their account but get hit with a capital gains tax when they go to withdraw.