>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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