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Author: connielj One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76420  
Subject: Foolish Four and IRAs Date: 3/15/2000 7:36 PM
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I just read the information on using the Foolish Four strategy in an IRA -

http://www.fool.com/money/allaboutiras/allaboutiras13.htm

Since there is a penalty for early withdrawals (aside from your original contribution) from a ROTH IRA, I am confused about the recommendation to:

"...buy the four stocks and hold them for a year. Then, a year and a day later, you check the guidelines to see if they are still underpriced. Those that are, you continue to hold; those that are not, you sell and use the proceeds to buy the new stocks that the approach identifies... Outside of an IRA, selling that frequently could cost you big bucks in capital gains taxes, but inside the IRA, your gains are free to compound year after year. The results can be startlingly impressive."

My question is: When you sell the stock, is that not considered a "withdrawal"? I assume that it is not, or this strategy would not be recommended. For it to be an acceptable practice, is it necessary to sell and immediately replace the sold stock with another?
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Author: AlyKat Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20123 of 76420
Subject: Re: Foolish Four and IRAs Date: 3/15/2000 7:55 PM
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My question is: When you sell the stock, is that not considered a "withdrawal"? I assume that it is not, or this strategy would not be recommended. For it to be an acceptable practice, is it necessary to sell and immediately replace the sold stock with another?

You are correct in assuming that when you sell a stock that is in an IRA it is not considered a withdrawal. You could buy another stock with the money resulting from the sale or you could keep it as cash (I wouldn't recommend keeping it as cash, though). It is only considered a "withdrawal" if you take possession of the money (there are certain exceptions to this too). You can have many different types of investments in an IRA and you can switch between investments without penalty as long as you keep it in an IRA. An IRA is just a "basket" that holds investments. You can put many different types of investments (cash, stocks, bonds, mutual funds, CD's, etc) in that basket. I hope this was helpful.

ak

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Author: connielj One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20141 of 76420
Subject: Re: Foolish Four and IRAs Date: 3/16/2000 11:59 AM
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AlyKat,

Thank you very much for the information!

- Connie

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Author: AlyKat Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 20161 of 76420
Subject: Re: Foolish Four and IRAs Date: 3/16/2000 10:12 PM
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AlyKat,

Thank you very much for the information!


You're very welcome!

ak



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