I am thinking of putting stocks in to my Roth Ira account is that a good idea?

Question

I am an aggressive investor. Why buy a mutual fund when in long term stocks out perform any other invesments. I am thinking why get vanguard's target retirement fund when i have to pay a fee. I am 21 years old i just got a 20,000 bonus from the military and i am thinking of putting my money in a few international stocks and in the developed world stocks, putting it in my Roth Ira and letting it sit there for the next 40 years.

Mutual funds underperform stocks by 4% add 40 years to that, this is not a good invesment.

Answer 1

That's a good idea only if you have had a lot of experience investing in individual stocks. One of the main advantages of a Roth is that you pay no taxes on the gains, HOWEVER, on the other hand, if you suffer a loss, you cannot deduct that loss from your taxes.

Also, picking a few international stocks and leaving them in your Roth for 40 years, is not a good investment strategy. If you're going to invest in individual stocks, then they must be monitored daily. You must spend at least an hour a week per stock to research the annual reports and stay current in the industry.

Perhaps a better approach for a ROTH would be to buy ETFs. There's several hundred out there now and like a mutual fund they are comprised of a cluster of stocks in particular sectors, like international stocks. The advantages are that they have (generally) lower management fees and can be traded throughout the day with limit and trailing stop orders.

Best of luck to you.
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Answer 2

Placing money in an Roth IRA is a great idea, However you will be limited to $4000 per year. With a Roth you can withdraw the money to buy a home if you choose or save it until you retire.
I don't like investing in stocks in a Roth IRA.
1. If you lose money you cannot deduct the losses from your income.
2. It is very hard to pick stocks and beat the market. Less than half of all mutual funds out perform the S&P 500.

I would invest my Roth money in a mutual fund with a good track record and or an index fund.

If you really do want to buy stocks watch what the top Mutual fund managers buy and when. I addition do a lot of resurch.

Most people I know lose their tails on individual stocks. I made a ton gambling on Chyrsler in the 80's, got overconfident and lost most of the gains.

For money outside of a Roth I recomend index funds. They have low turnover hence they do not generate high taxes. Vangard which you mentioned does an exclent job on index funds, they also are a no load fund house which may be a good choice for you.

Target retirment funds are ok for those who just want to save. By reading your question I don't think they are for you.

Answer 3

I think its a great idea to invest money in a Roth Ira, if you don't need to deduct it from your taxes now. However, you will not be able to put all 20,000 into a Roth Ira all at once. There is a limit of $4000 per year, this will go up to $5000 soon. So, the majority of your bonus will have to sit outside of your Roth for a while.

Also, regarding individual investing, I also invest in individual stocks. I've read a bit and taken a class on investing, and this has taught me the basics. However, after trying on my own for a while I found that I did better using a newsletter. It requires a lot less research and I get a good return. When I invested on my own I sold too much, I didn't fully trust my judgements even though many of them were quite good. I've used "The Motley Fool Stock Advisor" and "Motley Fool Global Gains". I've liked both but I am feeling more favorable to the international picks at Global Gains recently. The Fool's site is www.fool.com, but there are numerous newsletters available. The Hulbert Financial Digest reviews financial newsletters.

Answer 4

Hi, a Roth IRA is the best investment on the planet for the majority of people. The younger you are the better. You make contributions after-tax and you can take your principal out anytime without penalty. Earnings are tax free after 59 1/2 so it you have 15-30 years of contributing the maximum then you are going to end up with a nice chunk of money that is tax free in retirement. A taxable account will not generate the same returns because of the taxes you will pay on capital gains and dividends.

Answer 5

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Answer 6

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Answer 7

You do know that buying a mutual find is equivilant to investing in stocks, right? It's just a bunch of people handing their money to a professional investor who will buy stocks for them, either to match a specific index (such as the S&P 500), or according to a strategy designed to beat a benchmark.

Answer 8

My opinion, sit down with a financial advisor in the near future before making an investment decision. I think in your situation a professional may be able to help create a portfolio suitable to your needs and goals that you have set as well as potentially have access to additional tools that can help identify investments that meet your needs.

Answer 9

Yes it is a good idea, but you may get activated and it is possible that you won't be able to change your portfolio quickly. This may be OK with you, but I would suggest you don't invest too aggressively.