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Author: BAB67 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: Foolish Four in a Roth IRA Date: 8/22/1999 8:18 PM
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Sorry if this has been asked before. Please direct me to the post or area in Fooldom where I might learn more about my stupid question. I want to move my $4,000 from a Vanguard Index Fund to my discount broker so that I can use the money to invest in the Foolish Four at the beginning of the year. My reasons are that I'm comfortable with the added risk, I like the higher historical average returns and I think it's a smart way to cut down on capital gains taxes each year that I trade the stocks. My question is what happens to the left over change when buying four stocks rather than a mutual fund? It seems impossible to spend the $4,000 down to the last penny. So am I penalized for the cash not spent or is it somehow held in my account for future use?

Also can the cost of my trades be paid with money outside of my Roth IRA (i.e. a separate check)or must it come out of the $4,000?

Thanks for putting up with my anal questions, but I've only been Foolish for less than a year and want to maximize my tax advantages.

Thanks for your time and assistance,
Brett
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Author: NeutralFool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13348 of 74759
Subject: Re: Foolish Four in a Roth IRA Date: 8/23/1999 8:50 AM
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>I think it's a smart way to cut down on capital gains >taxes each year that I trade the stocks.

If this is in your Roth IRA, capital gains are not taxable. You paid the tax before you put your hard earned money in, now it grows (or diminishes)tax free. This fact makes the Roth IRA a good place for more active trading models.

>My question is what happens to the left over change >when buying four stocks rather than a mutual fund?
>It seems impossible to spend the $4,000 down to the >last penny. So am I penalized for the cash not spent >or is it somehow held in my account for future use?

It sounds like you understand this. Yes, part of the money must sit as cash. Whwn evatuating whethe to make this change remember that as a guideline you don't want more than 2.5% of your money to go towards commissions each year. Make sure you get low commissions rates or more capital. With $4,000 you only have $100.00 for trading each year.

>Also can the cost of my trades be paid with money >outside of my Roth IRA (i.e. a separate check)or must >it come out of the $4,000?

The broker will take the money for shares and commissions on your purchases from your Roth IRA but you can make contributions to cover the cost of the trades.

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13356 of 74759
Subject: Re: Foolish Four in a Roth IRA Date: 8/23/1999 11:30 AM
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In many if not all brokerage accounts, most if not all uninvested cash in an account is automatically swept into a money market account. In this way the change that you have left over and the dividends paid on any stocks earn some interest at money market rates until you are ready to make your next purchase. Similarly if you sell a stock and then wait some time before purchasing another, your cash form the sale also earns interest at money market rates.

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Author: zorloc Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 13409 of 74759
Subject: Re: Foolish Four in a Roth IRA Date: 8/24/1999 12:20 PM
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The broker will take the money for shares and commissions on your purchases from your Roth IRA but you can make contributions to cover the cost of the trades.

You still cannot exceed the $2000/year limit. And this would count toward that limit. You are allowed to pay an account fee outside the IRA. For example, T.Rowe charges $10/year that your IRA is worth less than $5,000. You can contribute $2000, and then send a check for $10 at the end of the year to pay the fee.

jbw

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