aggressively trade your IRA account?

[holden j caufield]

Does anyone do this. Not day trade but aggressively move to different stocks? I only ask because I bought a stock and it went up 15% on some news. If I sell it on my IRA account I don't think I have to pay the same gains taxes since it's an IRA account that a normal account would. I'm in some conservative funds on my 401k, I'd like to take some more chances on my IRA since I'm fairly young.

 

[HardcoreRobot]

nothing but index funds for me. ill take some risks in the market but not with my nest egg.

 

[Gunslinger08]

Index funds only. I'm a Bogle believer.

I tried my hand at active investment several years ago with some of my savings. My experience is that it's not worth the time. I enjoy financial stuff, but the amount of time I had to invest to research stocks and their tipping points weren't worth it to me. Now I just put my money into the low cost index funds offered by whichever investment house has my money.

 

[holden j caufield]

well the thought only crossed my mind since I saw this

http://forums.anandtech.com/showthread.php?t=2362361

and I really don't want to be stuck in another 20 years.

I've got no kids, SO makes decent money, we live a simple life. Now if I take chances and can accelerate things even if the risk ruin on 1 account is greater. I think that's something I am willing to do. I'm just wondering if there are any rules I should know better since trading on an IRA account has different restrictions.

Thanks

 

[glenn1]

Does anyone do this. Not day trade but aggressively move to different stocks? I only ask because I bought a stock and it went up 15% on some news. If I sell it on my IRA account I don't think I have to pay the same gains taxes since it's an IRA account that a normal account would. I'm in some conservative funds on my 401k, I'd like to take some more chances on my IRA since I'm fairly young.

I do some trading in my IRA also. I have the bulk in index funds but a decent chunk (30% or so) that I trade stocks with, generally small to midcap dividend payers that represent value plays. Generally that means couple of core long-term selections, along with a bit of cash to myself to opportunistically pick up out of favor companies and sectors and hold them for a while. For example, took a position in a dry bulk ship company (NM) about a year ago which I'm now scaling out of at a nice profit, and recently bought some shares in gold miners (AUY, IAG) and MREITS (NLY and TWO) which I hope will recover before long. It doesn't always work quickly (looking at you, TEVA) but with the dividends I can be patient.

 

[Gunslinger08]

well the thought only crossed my mind since I saw this

http://forums.anandtech.com/showthread.php?t=2362361

and I really don't want to be stuck in another 20 years.

I've got no kids, SO makes decent money, we live a simple life. Now if I take chances and can accelerate things even if the risk ruin on 1 account is greater. I think that's something I am willing to do. I'm just wondering if there are any rules I should know better since trading on an IRA account has different restrictions.

Thanks

I'm not an accountant or financial adviser, but I'm pretty sure that capital gains inside of an IRA aren't taxed until you withdraw (as regular income). If you have a Roth IRA, this means you never pay taxes on your gains.

If you want to retire early, you may want to invest outside of your IRA as well. In most cases, withdrawals from an IRA before you are 59.5 years old will result in a 10% federal penalty and potentially a state penalty as well.

 

[Scarpozzi]

I'm also not aggressive, but I do believe it's ok to own individual stocks on your IRAs. Particularly ones that have dividends attached to help build wealth no matter what the market does...

 

[manly]

I'm not an accountant or financial adviser, but I'm pretty sure that capital gains inside of an IRA aren't taxed until you withdraw (as regular income). If you have a Roth IRA, this means you never pay taxes on your gains.

If you want to retire early, you may want to invest outside of your IRA as well. In most cases, withdrawals from an IRA before you are 59.5 years old will result in a 10% federal penalty and potentially a state penalty as well.

I'm a huge fan of Roth IRAs. You can actually withdraw every dollar of contributions (not profits) without penalty. And there are other provisions where the penalty is waived (i.e. down payment on a first home purchase).

The OP doesn't have to "aggressively" trade in his IRA, but do your research and try to pick winners. Don't over-diversify. It's a bit harder right now as we're well into a bull market run.

I'm well aware of the beauty of compound interest, but contributing $5k a year and earning the historical 8% annual return won't make your IRA fabulously large in 30 years. If you're young, you have to take some chances IMO.

 

[KB]

Does anyone do this. Not day trade but aggressively move to different stocks? I only ask because I bought a stock and it went up 15% on some news. If I sell it on my IRA account I don't think I have to pay the same gains taxes since it's an IRA account that a normal account would. I'm in some conservative funds on my 401k, I'd like to take some more chances on my IRA since I'm fairly young.

As they say, "buy on the rumor, sell on the news". Maybe its sell time. And you are right you don't pay capital gains on an IRA until you withdraw it (if its a traditional IRA).

I don't trade my IRA, since its in there for the long haul. I only trade my fun money (AKA risk capital) as I am only willing to have as much money in the market as I am comfortable with at a given time. The IRA will never be needed to fix the car, so it can stay in the market till retirement.

 

[holden j caufield]

Thanks I've gained some info that the CS rep did not provide. I did call my brokerage and they informed me that there is about a 3 day settlement period on trading stocks on my particular IRA account and that they do provide margin on it(?). And if I break this settlement rule 3x in 1 year the account would be put on restriction.

I'm taking a leap on faith in some biotech and tech companies To me even if it's a 1/100 shot it's worth it for something life changing.

 

[glenn1]

Thanks I've gained some info that the CS rep did not provide. I did call my brokerage and they informed me that there is about a 3 day settlement period on trading stocks on my particular IRA account and that they do provide margin on it(?). And if I break this settlement rule 3x in 1 year the account would be put on restriction.

I'm taking a leap on faith in some biotech and tech companies To me even if it's a 1/100 shot it's worth it for something life changing.

That's called free-riding. Only use settled cash funds in your IRA to place buy trades, not proceeds from other sale trades.

Examples follow, numbers are arbitrary and don't include commissions and whatnot;

Situation 1: I deposited $1,000 to my IRA last week and use it to buy 50 shares ABC @ $10. No problem, my cash balance is debited for $500 and I own 50 ABC.

Situation 2: The week after that, I sell the 50 ABC for $600. I now have $1,100 showing in my cash account, of which $500 is from the original deposit and $600 is "unsettled" funds and won't be available for trading until T + 3 (trade + 3 days). I can use $500 for another buy trade, but not the $600 else it's a freeriding violation. After T+3, I can use the entire $1,100 with no issues.

 

[Dr. Detroit]

Yes - I aggressively trade one of my rollover + SEP accounts.

All gains are not taxed today - only taxed when you begin to pull income out age 55+ or if you decide to pull early you will pay penalties + taxes.

 

[KoolAidKid]

I am working on a automated quantitative trading strategy with a paper (fake money) account that I have with Interactive Brokers. Once I feel that it is tweaked pretty well I plan to implement it using actual money in an IRA. I don't feel comfortable doing this with all of my retirement money, though, just some of it.

 

[nageov3t]

a little.

I divide my IRA with 90% going to 3 index funds (2 US, 1 Asian) and the other 10% into stocks to play with.

 

[Spungo]

The OP doesn't have to "aggressively" trade in his IRA, but do your research and try to pick winners. Don't over-diversify. It's a bit harder right now as we're well into a bull market run.

You can get a nice balance of safety and speculation with certain index funds. Instead of buying funds based on company size or dividend, buy based on sector. Is oil way down? Buy an ETF that has oil futures or oil companies. There are funds for real estate trusts, banks, insurance companies, banks + insurance companies, all mining, gold mining, and the list goes on.
This is what I plan on doing with my retirement investments. It allows me to make extremely large bets without taking too much risk. An ETF can go down 20% and I get stopped out, but it won't go to 0. I won't get Enron'ed.

 

[monkeydelmagico]

If your IRA is fully invested in the stock market by index, market basket, sector, or otherwise you are considered "aggressive". If your thinking about kicking it up another couple notches and trying to speculate I'd say don't. Without alot of research or insider intel it's difficult to beat an index fund. Hell, most professional fund managers can't seem to.

 

[DaveSimmons]

Nope. 100% index funds for me. Zero effort and my odds of gains are better than for traders as a group. Some traders will win big, some will lose big, I'll do better than most of them.

 

[Gunslinger08]

If your IRA is fully invested in the stock market by index, market basket, sector, or otherwise you are considered "aggressive". If your thinking about kicking it up another couple notches and trying to speculate I'd say don't. Without alot of research or insider intel it's difficult to beat an index fund. Hell, most professional fund managers can't seem to.

Yeah, the general wisdom for "low information investors" is:
1. Buy low cost index funds. Your returns, over the long haul, will beat a majority of active traders.
2. Split your money so that the percentage invested in bonds (or bond indexes) is equal to your age. So if you're 40, you should have 40% bonds and 60% stocks. I think a lot of people agree that this is a little outdated. I personally hold a smaller % of bonds than this "rule" would recommend.

 

[Spungo]

Hell, most professional fund managers can't seem to.

This is because fund managers do a proper job of hedging their bets. They have a combination of short and long positions, they use options, and they leave the market before it peaks. Right now is one of those times, actually. The hedge funds jumped out of the market last summer.
http://www.forbes.com/sites/sharding/2013/07/19/smart-money-and-public-investors-disagree-again/

 

[zephyrprime]

I trade aggressively in mine. But you shouldn't because even having to ask this question about a single stock rising on some news demonstrates that you don't have enough investing accumen to trade actively.

 

[Spungo]

2. Split your money so that the percentage invested in bonds (or bond indexes) is equal to your age. So if you're 40, you should have 40% bonds and 60% stocks. I think a lot of people agree that this is a little outdated. I personally hold a smaller % of bonds than this "rule" would recommend.

I like an idea Stansberry had on one of his podcasts. He calls it "allocate to value" which means buy whatever is the best value at that time. You could be in 90% stocks today then 90% in bonds next year. Things go in cycles so there's always something that is overpriced and something that is cheap. I'll use today as the example. Should you buy stocks today? I would say no. The market is at all time highs, people have record levels of margin debt (again), the Shiller PE is something ridiculous like 26, sub-prime lending is a problem (again), and the overall situation looks like it's ready to crah (again). Should you buy bonds today? I would say no. Yield on the 10 year treasury has doubled since summer, and rising yields means bond prices are going lower. Don't buy things as they are going down. Rising interest rates are often a sign that the stock market is about to decline, so that's another reason not to buy stocks. Should you buy real estate or REITs? I think those are tied to interest rates as well, so don't buy those. Should you buy commodities like oil, gold, silver, copper? Personally, I'm buying into mining right now. You might decide that nothing is worth buying at this time, so you hold onto your cash and wait until something is worth buying.

Stansberry is one of the guys who is now completely out of the market because he thinks it's overvalued. I think he wrote that in the end of December. One thing I've noticed about the current market is that it's evenly divided between the people who think the economic recovery is real and the people who think it's bullshit. The people who think the recovery is phony have pulled out of US stocks and into commodities. Schiff, Faber, and Stansberry like gold. Jim Rogers likes agriculture. I'm buying gold and silver mining companies because some of them are down 60-80%, making them very oversold. The people who think the economic recovery is real tend to be more bullish on US equities.

 

[JimKiler]

I'm a huge fan of Roth IRAs. You can actually withdraw every dollar of contributions (not profits) without penalty. And there are other provisions where the penalty is waived (i.e. down payment on a first home purchase).

The OP doesn't have to "aggressively" trade in his IRA, but do your research and try to pick winners. Don't over-diversify. It's a bit harder right now as we're well into a bull market run.

I'm well aware of the beauty of compound interest, but contributing $5k a year and earning the historical 8% annual return won't make your IRA fabulously large in 30 years. If you're young, you have to take some chances IMO.

Agreed, you can withdraw the principle from a Roth IRA for a lot of reasons which is a nice failsafe.

To answer the OP question I do not own individual stocks for any of my retirement accounts. I do not want to add non systemic risk to my portfolio. Personally i would leave your retirement accounts alone and take other money and invest it in stocks separately from retirement accounts.

 

[RichieZ]

I trade very aggressively with my roth ira, not high frequency or day trading but high growth stocks that have worked out:

for actual diversified investing I use wealthfront, they give me access to various asset class ETFs and do auto tax loss harvesting:

 

[brianmanahan]

I like an idea Stansberry had on one of his podcasts. He calls it "allocate to value" which means buy whatever is the best value at that time. You could be in 90% stocks today then 90% in bonds next year. Things go in cycles so there's always something that is overpriced and something that is cheap. I'll use today as the example. Should you buy stocks today? I would say no. The market is at all time highs, people have record levels of margin debt (again), the Shiller PE is something ridiculous like 26, sub-prime lending is a problem (again), and the overall situation looks like it's ready to crah (again). Should you buy bonds today? I would say no. Yield on the 10 year treasury has doubled since summer, and rising yields means bond prices are going lower. Don't buy things as they are going down. Rising interest rates are often a sign that the stock market is about to decline, so that's another reason not to buy stocks. Should you buy real estate or REITs? I think those are tied to interest rates as well, so don't buy those. Should you buy commodities like oil, gold, silver, copper? Personally, I'm buying into mining right now. You might decide that nothing is worth buying at this time, so you hold onto your cash and wait until something is worth buying.

trying to guess what assets are going to do best is a game not best suited for retail investors

i say pick an asset allocation, keep investing in it despite what anyone says, and rebalance every now and then

if someone does that, they are likely to end up with more money in 30-40 years than if they had tried to divine the markets

 

[TallBill]

Dont touch mine. Vanguard, Bogglehead

60% Total stock market
30% International stock market
10% Bond funds