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And when the market goes down and you sell how do you replace your loss? Since you can only put 2000 a year in and can not deduct losses on your tax return I would put the high risk investments in a regular account.

I've wondered about this issue, too. Because you don't pay taxes on the dividends/earnings in a Roth IRA, it seems like you'd want your highest-returning investments there (instead of in a regular account where you have to pay capital gains taxes, etc.). In addition, since investment in the Roth is for the verrrrry long term (usually), you can afford to be more risky in your investments.

The market may go down, but as others have pointed out, you don't see the loss unless you actually sell. Assuming you're doing your research on these higher-risk investments, it still seems like the best strategy is to put them in your Roth.

The 2000 cap on your contributions would also seem to limit how much you can lose (total) in these high-risk situations.

Of course, it depends what you consider 'high risk' investments. I'm probably on the conservative side of things, so maybe what I consider 'high risk' isn't what you're thinking of at all. :)

- Kiri
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