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Learning to Invest / Investing Beginners


Subject:  Re: Lots of questions! Date:  12/23/2008  4:26 PM
Author:  CABob Number:  21333 of 29145

Perhaps you are confusing types of accounts with types of investments.
Traditional IRAs and Roth IRAs are types of accounts. Stocks, bonds, mutual funds, ETFs, certificates of deposit and savings accounts are types of investments. Accounts can be held at banks, brokers, mutual fund companies, and similar institutions. The types of investments vary with the type of institution although the differences is getting cloudy. Traditionally, stocks are held at a broker. Mutual funds can be held at a broker or a mutual fund company. Savings accounts and certificates of deposit are usually held at a bank.
The main differences between types of accounts are their tax treatment. Traditional IRA are usually funded with pre-tax (untaxed) money and withdrawals are taxed like ordinary income. Roth IRAs are funded with money that has already been taxed, but, withdrawals are made tax free.
I taxable account is funded with after tax money. Taxes on interest and dividends on the investments are taxed as you receive them. Capital gains taxes are imposed on investments when you sell them.
You can buy and sell investments within IRAs but all money must stay within the account until withdrawn. Commissions must be paid from within the account.

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